/raid1/www/Hosts/bankrupt/TCR_Public/210919.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, September 19, 2021, Vol. 25, No. 261
Headlines
ANGEL OAK 2021-5: Fitch Assigns Final B Rating on B-2 Debt
ARES LOAN I: Moody's Assigns Ba3 Rating to $19.4MM Class E Notes
BENCHMARK 2021-B29: Fitch Assigns B- Rating on 2 Tranches
BENEFIT STREET XXI: S&P Assigns BB- (sf) Rating on Class E-R Notes
BIRCH GROVE 2: Moody's Assigns Ba3 Rating to $21.25MM Cl. E Notes
CARVANA AUTO 2019-4: Moody's Ups Rating on Class E Notes From Ba2
CFIP CLO 2017-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
CFIP CLO 2017-1: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
CITIGROUP COMMERCIAL 2018-C6: Fitch Rates J-RR Certs 'B-'
COMM 2013-CCRE9: S&P Lowers Class F Certs Rating to 'D (sf)'
COMM 2014-CCRE16: Fitch Affirms CC Rating on Class F Certs
COMM 2021-CCRE1: Fitch Affirms CC Rating on Class G Certs
CSAIL 2016-C7: Fitch Lowers 2 Debt Tranches to 'CCC'
CSMC 2016-NXSR: Fitch Affirms CC Rating on 4 Tranches
EATON VANCE 2020-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
ELMWOOD CLO XI: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
FORT WASHINGTON 2021-2: S&P Assigns BB- (sf) Rating on Cl. E Notes
FOURSIGHT CAPITAL 2020-1: Moody's Ups Rating on Cl. F Notes to Ba2
ICG US 2014-1: Moody's Assigns Ba3 Rating to $20MM Cl. D-R2 Notes
JP MORGAN CHASE 2007-CIBC20: S&P Lowers Class D Certs Rating to 'D'
JPMCC COMMERCIAL 2015-JP1: Fitch Lowers Class G Certs to 'CCC'
MAGNETITE XXVI: Moody's Assigns Ba3 Rating to $30.15MM E-R Notes
MERIDIANLINK INC: Moody's Assigns 'B2' CFR Amid Recent IPO
MONROE CAPITAL XII: Moody's Gives Ba3 Rating to $30MM Cl. E Notes
MORGAN STANLEY 2013-C11: Fitch Lowers Class E Certs to 'C'
MORGAN STANLEY 2017-C34: Fitch Lowers 2 Certs to 'CCC'
MORGAN STANLEY 2018-L1: Fitch Affirms B- Rating on H-RR Debt
NEUBERGER BERMAN 44: S&P Assigns Prelim BB- (sf) Rating on E Notes
NEW RESIDENTIAL 2021-NQM3: Fitch Gives 'B(EXP)' Rating to B-2 Debt
NOMURA HOME 2006-WF1: Moody's Hikes Rating on Cl. M-3 Bonds to Ba1
OCP CLO 2017-13: S&P Assigns BB- (sf) Rating on Class D-R Notes
POST CLO 2021-1: S&P Assigns BB- (sf) Rating on Class E Notes
RR 18: S&P Assigns BB- (sf) Rating on $30MM Class D Notes
SARANAC CLO VI: Moody's Hikes Rating on $17MM Class E Notes to B1
SEQUOIA MORTGAGE 2021-6: Fitch Gives 'BB-(EXP)' Rating to B4 Certs
STARWOOD MORTGAGE 2021-4: Fitch Gives 'B-(EXP)' Rating to B-2 Debt
SYMPHONY CLO XXVIII: S&P Assigns BB- (sf) Rating on Class E Notes
SYMPHONY CLO XXVIII: S&P Assigns Prelim BB- (sf) Rating on E Notes
TCP WHITNEY: S&P Assigns BB- (sf) Rating on $24MM Class E-R Notes
UBS COMMERCIAL 2017-C4: Fitch Affirms B- Rating on 2 Tranches
UBS COMMERCIAL 2017-C5: Fitch Affirms B- Rating on G-RR Certs
UBS COMMERCIAL 2018-C13: Fitch Affirms B- Rating on G-RR Debt
VERUS 2021-5: S&P Assigns Prelim B- (sf) Rating on Class B-2 Notes
WELLS FARGO 2018-C47: Fitch Affirms B- Rating on H-RR Certs
WELLS FARGO 2021-2: Fitch to Rate B-5 Certs 'B+(EXP)'
WIND RIVER 2019-3: S&P Assigns BB- (sf) Rating on Class E-2R Notes
*********
ANGEL OAK 2021-5: Fitch Assigns Final B Rating on B-2 Debt
----------------------------------------------------------
Fitch Ratings has assigned final ratings to Angel Oak Mortgage
Trust 2021-5.
DEBT RATING PRIOR
---- ------ -----
AOMT 2021-5
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBB-sf New Rating BBB-(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch rates the residential mortgage-backed certificates issued by
Angel Oak Mortgage Trust 2021-5, Mortgage-Backed Certificates,
Series 2021-5 (AOMT 2021-5) as indicated above. The certificates
are supported by 982 loans with a balance of $389.62 million as of
the cutoff date. This will be the 17th Fitch-rated AOMT
transaction.
The certificates are secured by mortgage loans that were originated
by Angel Oak Home Loans LLC, Angel Oak Mortgage Solutions LLC,
Angel Oak Prime Bridge LLC (referred to as Angel Oak originators),
78.9% are designated as nonqualified mortgage (Non-QM), and 21.1%
are investment properties not subject to the Ability to Repay Rule.
No loans are designated as QM in the pool.
There is LIBOR exposure in this transaction. Of the pool, 274 loans
(27.9% by loan count) comprises adjustable-rate mortgage loans that
reference one-year LIBOR. The offered certificates are fixed rate
and capped at the net weighted average coupon.
There are 15 loans in the pool, that Fitch identified as being
located in Hurricane Ida FEMA designated individual assistance
areas. The servicer has confirmed that they have not received any
reports of damage from borrowers located in the impacted areas. As
a result, there was no impact to the transaction.
KEY RATING DRIVERS
Non-QM Credit Quality (Mixed): The collateral consists of 982
loans, totaling $390 million, and seasoned approximately 13 months
in aggregate. The borrowers have a strong credit profile (729 FICO
and 36% DTI as determined by Fitch) and relatively high leverage
with an original CLTV of 73.5% that translates to a Fitch
calculated sLTV of 89.5%. Of the pool, 72.5% consists of loans
where the borrower maintains a primary residence, while 27.5%
comprises an investor property or second home based on Fitch's
analysis; 11.7% of the loans were originated through a retail
channel. Additionally, 78.9% are designated as Non-QM, while the
remaining 21.1% are exempt from QM since they are investor loans.
The pool contains 70 loans over $1 million, with the largest $3.1
million.
21.1% comprises loans on investor properties (7.2% underwritten to
the borrowers' credit profile and 13.9% comprising investor cash
flow loans). Of the borrowers, 0.1% have subordinate financing in
Fitch's analysis since Fitch included the deferred amounts as a
junior lien amount; there are three second lien loans, and Fitch
views 3.6% of borrowers as having a prior credit event in the past
seven years.
Two of the loans in the pool had a deferred balance that totaled
$13,259. These deferred balances were treated as a junior lien
amount in Fitch's analysis which resulted in an increased CLTV.
There are 14 foreign nationals/non-permanent residents in the pool.
Fitch treated these borrowers as investor occupied, coded as ASF1
(no documentation) for employment and income documentation, and
removed the liquid reserves.
The largest concentration of loans is in Florida (31.4%), followed
by California and Georgia. The largest MSA is Miami MSA (14.6%)
followed by Los Angeles MSA (10%) and Atlanta MSA (7.6%). The top
three MSAs account for 32.2% of the pool. As a result, there was no
adjustment for geographic concentration.
Although the credit quality of the borrowers is higher than prior
AOMT transactions, the pool characteristics resemble non-prime
collateral, and therefore, the pool was analyzed using Fitch's
non-prime model.
Loan Documentation (Negative): Fitch determined that 79.4% of the
pool was underwritten to borrowers with less than full
documentation. Of this amount, 64.1% was underwritten to a 12- or
24-month bank statement program for verifying income, which is not
consistent with Appendix Q standards and Fitch's view of a full
documentation program. To reflect the additional risk, Fitch
increases the probability of default by 1.5x on the bank statement
loans. Besides loans underwritten to a bank statement program, 0.8%
is an asset depletion product, and 13.9% is a debt service coverage
ratio product. The pool does not have any loans underwritten to a
CPA or PnL product, which Fitch viewed as a positive.
Two loans to foreign nationals/non-permanent residents were
underwritten to a bank statement program and twelve loans to
foreign nationals/non-permanent residents were underwritten to full
documentation, however in Fitch's analysis these loans were treated
as no documentation loans.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent principal and interest. The
limited advancing reduces loss severities as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside is the additional stress on the
structure as there is limited liquidity in the event of large and
extended delinquencies.
Modified Sequential Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A notes
while excluding the subordinate bonds from principal until all
three classes are reduced to zero. To the extent that either a
cumulative loss trigger event or delinquency trigger event occurs
in a given period, principal will be distributed sequentially to
the class A-1, A-2 and A-3 bonds until they are reduced to zero.
Macro or Sector Risks (Positive): Consistent with the Additional
Scenario Analysis section of Fitch's "U.S. RMBS Coronavirus-Related
Analytical Assumptions" criteria, Fitch will consider applying
additional scenario analysis based on stressed assumptions as
described in the section to remain consistent with significant
revisions to Fitch's macroeconomic baseline scenario or if actual
performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of the coronavirus-related Economic Risk Factor (ERF)
floors of 2.0 and used ERF floors of 1.5 and 1.0 for the 'BBsf' and
'Bsf' rating stresses, respectively. Fitch's "Global Economic
Outlook - June 2021" and related base-line economic scenario
forecasts have been revised to 6.8% U.S. GDP growth for 2021 and
3.9% for 2022 following a 3.5% GDP decline in 2020.
Additionally, Fitch's U.S. unemployment forecasts for 2021 and 2022
are 5.6% and 4.5%, respectively, which is down from 8.1% in 2020.
These revised forecasts support Fitch reverting to the 1.5 and 1.0
ERF floors described in Fitch's "U.S. RMBS Loan Loss Model
Criteria."
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. Sensitivity analyses was
conducted at the state and national levels to assess the
effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 43.4% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper MVDs than assumed at the
MSA level. Sensitivity analyses was conducted at the state and
national levels to assess the effect of higher MVDs for the
subject pool as well as lower MVDs, illustrated by a gain in
home prices.
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Clayton, Infinity and Consolidated Analytics. The
third-party due diligence described in Form 15E focused on three
areas: compliance review, credit review, and valuation review.
Fitch considered this information in its analysis and, as a result,
Fitch did not make any adjustment(s) to its analysis due to the due
diligence findings. Based on the results of the 100% due diligence
performed on the pool, the overall expected loss was reduced by
0.48%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria." The sponsor,
Angel Oak Mortgage Fund EU, LLC, engaged American Mortgage
Consultants, Inc., Clayton Services, Consolidated Analytics, Inc.
and Infinity IPS to perform the review. Loans reviewed under these
engagements were given compliance, credit and valuation grades and
assigned initial grades for each subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format. The ASF data tape
layout was established with input from various industry
participants, including rating agencies, issuers, originators,
investors and others, to produce an industry standard for the
pool-level data in support of the U.S. RMBS securitization market.
The data contained in the data tape layout were populated by the
due diligence company and no material discrepancies were noted.
ESG CONSIDERATIONS
AOMT 2021-5 has an ESG Relevance Score of '4'[+] for Transaction
Parties & Operational Risk due to strong transaction due diligence
and a 'RPS1-' Fitch-rated servicer, which resulted in a reduction
in expected losses, and is relevant to the rating in conjunction
with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
ARES LOAN I: Moody's Assigns Ba3 Rating to $19.4MM Class E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Ares Loan Funding I, Ltd. (the "Issuer" or "Ares
Loan Funding I").
Moody's rating action is as follows:
US$240,000,000 Class A-1 Senior Floating Rate Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$20,000,000 Class A-2 Senior Floating Rate Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$40,000,000 Class B Senior Floating Rate Notes due 2034,
Definitive Rating Assigned Aa2 (sf)
US$20,800,000 Class C Mezzanine Deferrable Floating Rate Notes due
2034, Definitive Rating Assigned A2 (sf)
US$24,800,000 Class D Mezzanine Deferrable Floating Rate Notes due
2034, Definitive Rating Assigned Baa3 (sf)
US$19,400,000 Class E Mezzanine Deferrable Floating Rate Notes due
2034, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Ares Loan Funding I is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of first lien senior secured loans and eligible investments, and up
to 10% of the portfolio may consist of assets other than senior
secured loans. The portfolio is approximately 90% ramped as of the
closing date.
Ares CLO Management LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five-year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 77
Weighted Average Rating Factor (WARF): 2997
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 6.0%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.1 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
BENCHMARK 2021-B29: Fitch Assigns B- Rating on 2 Tranches
---------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Benchmark 2021-B29 Mortgage Trust commercial mortgage pass-through
certificates, series B29, as follows:
-- $20,710,000 class A-1 'AAAsf'; Rating Outlook Stable;
-- $78,526,000 class A-2 'AAAsf'; Rating Outlook Stable;
-- $177,306,000 class A-3 'AAAsf'; Rating Outlook Stable;
-- $74,500,000 (a) class A-4 'AAAsf'; Rating Outlook Stable;
-- $370,184,000 (a) class A-5 'AAAsf'; Rating Outlook Stable;
-- $24,171,000 class A-SB 'AAAsf'; Rating Outlook Stable;
-- $819,937,000 (b) class X-A 'AAAsf'; Rating Outlook Stable;
-- $105,154,000 (b) class X-B 'A-sf'; Rating Outlook Stable;
-- $74,540,000 class A-S 'AAAsf'; Rating Outlook Stable;
-- $51,912,000 class B 'AA-sf'; Rating Outlook Stable;
-- $53,242,000 class C 'A-sf'; Rating Outlook Stable;
-- $61,230,000 (b, c) class X-D 'BBB-sf'; Rating Outlook Stable;
-- $26,621,000 (b, c) class X-F 'BB-sf'; Rating Outlook Stable;
-- $10,648,000 (b, c) class X-G 'B-sf'; Rating Outlook Stable;
-- $33,277,000 (c) class D 'BBBsf'; Rating Outlook Stable;
-- $27,953,000 (c) class E 'BBB-sf'; Rating Outlook Stable;
-- $26,621,000 (c) class F 'BB-sf'; Rating Outlook Stable;
-- $10,648,000 (c) class G 'B-sf'; Rating Outlook Stable.
The following classes are not expected to be rated by Fitch:
-- $41,263,977 (c) class H;
-- $41,263,977 (b, c) class X-H;
-- $26,145,545 (c, d) class RR Interest;
-- $29,899,402 (c, e) class RR Certificates.
(a) The initial certificate balances of class A-4 and A-5 are not
yet known and are expected to be $444,684,000 in aggregate, subject
to a 5% variance. The certificate balances will be determined based
on the final pricing of those classes of certificates. The expected
class A-4 balance range is $0-$149,000,000, and the expected class
A-5 balance range is $295,684,000-$444,684,000. The class balances
for A-4 and A-5 as shown above reflect the midpoints of each
range.
(b) Notional amount and interest only (IO).
(c) Privately placed and pursuant to Rule 144A.
(d) Vertical risk retention interest.
(e) Non-offered vertical credit risk retention interest.
The expected ratings are based on information provided by the
issuer as of Sept. 14, 2021.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 47 loans secured by 90
commercial properties having an aggregate principal balance of
$1,120,898,925 as of the cut-off date. The loans were contributed
to the trust by Citi Real Estate Funding Inc., German American
Capital Corporation, JPMorgan Chase Bank, National Association and
Goldman Sachs Mortgage Company. The Master Servicer is expected to
be Midland Loan Services, a Division of PNC Bank, National
Association and the Special Servicer is expected to be LNR
Partners, LLC.
KEY RATING DRIVERS
Higher Fitch Leverage: The transaction's Fitch leverage is higher
than other recent U.S. multiborrower transactions rated by Fitch.
The pool's Fitch loan-to-value ratio (LTV) of 104.5% is higher than
the 2020 average of 99.6% and the YTD 2021 average of 102.5%.
Additionally, the pool's Fitch trust debt service coverage ratio
(DSCR) of 1.26x is lower than the 2020 and YTD 2021 averages of
1.32x and 1.38x, respectively. Excluding credit opinion loans, the
pool's weighted average (WA) Fitch DSCR was 1.27x. Excluding credit
opinion loans, the pool's WA Fitch LTV is 113.3%.
Investment-Grade Credit Opinion Loans: The pool includes three
loans, representing 21.0% of the pool, that received
investment-grade credit opinions. This is lower than the 2020
average of 24.5% but higher than the YTD 2021 average of 14.0%,
respectively. One SoHo Square (9.99% of the pool) received a credit
opinion of 'BBB-sf' on a standalone basis, HQ @ First (8.8% of the
pool) received a credit opinion of 'BBB-sf' on a standalone basis
and 175 East 62nd Street (2.2% of the pool) received a credit
opinion of 'BBBsf' on a standalone basis.
High Property Type Exposure to Retail and Office: Loans secured by
retail properties represent 30.1% of the pool by balance including
seven of the top 20. The total retail concentration is larger than
the 2020 average of 16.3% and the YTD 2021 average of 16.5%. Loans
secured by office properties represent 32.9% of the pool by
balance, which is below the 2020 and YTD 2021 averages of 41.2% and
40.2%, respectively. Loans secured by multifamily properties
represent 21.1% of the pool, which is higher than the 2020 and YTD
2021 averages of 16.3% and 14.7%, respectively. The pool has two
loans secured by hotel properties, making up 1.7% of the pool by
balance. This is significantly below the 2020 and YTD 2021 averages
of 9.2% and 4.7%, respectively.
Below-Average Amortization: Based on the scheduled balances at
maturity, the pool will pay down by 4.4%, which is below the 2020
and YTD 2021 averages of 5.3% and 4.8%, respectively. Thirty-one
loans (75.1% of the pool) are full interest-only (IO) loans, which
is higher than the 2020 and YTD 2021 averages of 67.7% and 72.2%,
respectively. Six loans (11.0% of the pool) are partial IO loans,
which is lower than the 2020 and YTD 2021 averages of 20.0% and
17.6%, respectively.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-
sf' / 'BB-sf' / 'B-sf'.
-- 20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AAAsf' / 'AA+sf' / 'AA-
sf' / 'A-sf' / 'BBB+sf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Similarly, declining cash flow decreases property value and
capacity to meet its debt service obligations. The table below
indicates the model-implied rating sensitivity to changes to the
same one variable, Fitch NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-
sf' / 'BB-sf' / 'B-sf'.
-- 10% NCF Decline: 'A+sf' / 'A-sf' / 'BBB-sf' / 'BB+sf' / 'B+sf'
/ 'CCCsf' / 'CCCsf'.
-- 20% NCF Decline: 'A-sf' / 'BBB-sf' / 'BB+sf' / 'Bsf' / 'CCCsf'
/ 'CCCsf' / 'CCCsf'.
-- 30% NCF Decline: 'BBBsf' / 'BB+sf' / 'B-sf' / 'CCCsf' /
'CCCsf' / 'CCCsf'/ 'CCCsf'.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on A comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis, and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
BENEFIT STREET XXI: S&P Assigns BB- (sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
B-R, C-R, D-R, and E-R replacement notes from Benefit Street
Partners CLO XXI Ltd./Benefit Street Partners CLO XXI LLC, a CLO
originally issued in August 2020 that is managed by Benefit Street
Partners LLC. At the same time, S&P withdrew its ratings on the
original class A-1, A-2, B-1, B-2, C, D, and E notes following
payment in full on the Sept. 14, 2021, refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class A-1-R, A-2-R, C-R, D-R, and E-R notes
were issued at a lower spread over three-month LIBOR than the
original notes.
-- The replacement class B-R notes were issued at a floating
spread, replacing the class B-1 floating-spread and class B-2
fixed-coupon notes.
-- The stated maturity and the reinvestment period were extended
by 3.25 years.
-- The documents were updated, including adding the ability to
purchase bonds and workout-related assets and the capacity to
account for the replacement of LIBOR.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Benefit Street Partners CLO XXI Ltd./
Benefit Street Partners CLO XXI LLC
Class A-1-R, $279 million: AAA (sf)
Class A-2-R, $9 million: AAA (sf)
Class B-R, $54 million: AA (sf)
Class C-R (deferrable), $27 million: A (sf)
Class D-R (deferrable), $27 million: BBB- (sf)
Class E-R (deferrable), $18 million: BB- (sf)
Ratings Withdrawn
Benefit Street Partners CLO XXI Ltd./
Benefit Street Partners CLO XXI LLC
Class A-1 to NR from 'AAA (sf)'
Class B-1 to NR from 'AA (sf)'
Class B-2 to NR from 'AA (sf)'
Class C (deferrable) to NR from 'A (sf)'
Class D (deferrable) to NR from 'BBB- (sf)'
Class E (deferrable) to NR from 'BB- (sf)'
NR--Not rated.
BIRCH GROVE 2: Moody's Assigns Ba3 Rating to $21.25MM Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Birch Grove CLO 2 Ltd (the "Issuer" or "Birch Grove
II").
Moody's rating action is as follows:
US$310,000,000 Class A-1 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$15,000,000 Class A-2 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$51,250,000 Class B Senior Secured Floating Rate Notes due 2034,
Assigned Aa2 (sf)
US$25,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$23,750,000 Class D-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$12,500,000 Class D-2 Junior Secured Deferrable Floating Rate
Notes due 2034, Assigned Ba1 (sf)
US$21,250,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Birch Grove II is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to 10%
of the portfolio may consist of second lien loans, unsecured loans
and bonds. The portfolio is approximately 99% ramped as of the
closing date.
Birch Grove Capital LP (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2929
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.1 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
CARVANA AUTO 2019-4: Moody's Ups Rating on Class E Notes From Ba2
-----------------------------------------------------------------
Moody's Investors Service has upgraded eight outstanding tranches
from five Carvana Auto Receivables Trust transactions issued in
2019 and 2020. The securitizations are sponsored by Carvana LLC, an
indirect wholly owned subsidiary of Carvana Co. (B3, stable) and
are serviced by Bridgecrest Credit Company, LLC, an indirect wholly
owned subsidiary of DriveTime Auto Group. The notes are backed by a
pool of retail automobile loan contracts originated by Carvana
LLC.
The complete rating actions are as follows:
Issuer: Carvana Auto Receivables Trust 2019-1
Class E Asset-Backed Notes, Upgraded to A2 (sf); previously on Jun
14, 2021 Upgraded to Baa1 (sf)
Issuer: Carvana Auto Receivables Trust 2019-2
Class D Notes, Upgraded to Aaa (sf); previously on Jun 14, 2021
Upgraded to Aa1 (sf)
Class E Notes, Upgraded to A3 (sf); previously on Jun 14, 2021
Upgraded to Baa2 (sf)
Issuer: Carvana Auto Receivables Trust 2019-3
Class D Notes, Upgraded to Aaa (sf); previously on Jun 14, 2021
Upgraded to Aa2 (sf)
Class E Notes, Upgraded to Baa2 (sf); previously on Jun 14, 2021
Upgraded to Baa3 (sf)
Issuer: Carvana Auto Receivables Trust 2019-4
Class D Notes, Upgraded to Aa1 (sf); previously on Jun 14, 2021
Upgraded to Aa3 (sf)
Class E Notes, Upgraded to Baa3 (sf); previously on Jun 14, 2021
Upgraded to Ba2 (sf)
Issuer: Carvana Auto Receivables Trust 2020-NP1
Class D Notes, Upgraded to Aa2 (sf); previously on Jun 14, 2021
Upgraded to Aa3 (sf)
RATINGS RATIONALE
The upgrades are primarily driven by the buildup of credit
enhancement due to structural features including a sequential pay
structure, non-declining reserve account and overcollateralization
as well as a reduction in Moody's cumulative net loss expectations
for the underlying pools.
Moody's lifetime cumulative net loss expectations are 8.5% for the
Carvana 2019 vintage transactions and 16% for the Carvana 2020-NP1
transaction. The loss expectations reflect updated performance
trends on the underlying pools. More recently US consumers have
shown a high degree of resilience owing to the government stimulus
and the relief options offered by servicers.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
September 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are greater than necessary to
protect investors against current expectations of loss could lead
to an upgrade of the ratings. Losses could decline from Moody's
original expectations as a result of a lower number of obligor
defaults or greater recoveries from the value of the vehicles
securing the obligors promise of payment. The US job market and the
market for used vehicles are also primary drivers of the
transaction's performance. Other reasons for better-than-expected
performance include changes in servicing practices to maximize
collections on the loans or refinancing opportunities that result
in a prepayment of the loan.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could lead to a
downgrade of the ratings. Losses could increase from Moody's
original expectations as a result of a higher number of obligor
defaults or a deterioration in the value of the vehicles securing
the obligors promise of payment. The US job market and the market
for used vehicles are also primary drivers of the transaction's
performance. Other reasons for worse-than-expected performance
include poor servicing, error on the part of transaction parties,
lack of transactional governance and fraud.
CFIP CLO 2017-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R and E-R replacement notes and the new class X notes from CFIP
CLO 2017-1 Ltd./CFIP CLO 2017-1 LLC, a CLO originally issued in
December 2017 that is managed by CFI Partners LLC. At the same
time, S&P withdrew its ratings on the original class A, B, C, D,
and E notes following payment in full on the Sept. 15, 2021,
refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-R and E-R notes will be
issued at a higher spread over three-month LIBOR than the original
notes.
-- The class X notes will be issued on the refinancing date and
are expected to be paid down using interest proceeds during the
first 8 payment dates, beginning with the January payment date.
-- The non-call period will be extended by approximately 2 years
to September 2023.
-- The reinvestment period will be extended 4.75 years.
-- The stated maturity date (for the replacement notes and the
existing subordinated notes) will be extended by 4.75 years.
-- The weighted average life test date will be extended to 9 years
from the refinancing date.
-- No additional subordinated notes will be issued on the
refinancing date.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
CFIP CLO 2017-1 Ltd./CFIP CLO 2017-1 LLC
Class X, $2.880 million: AAA (sf)
Class A-R, $300.250 million: AAA (sf)
Class B-R, $61.750 million: AA (sf)
Class C-R (deferrable), $28.500 million: A (sf)
Class D-R (deferrable), $28.500 million: BBB- (sf)
Class E-R (deferrable), $19.200 million: BB- (sf)
Income notes, $44.073 million: NR
Ratings Withdrawn
CFIP CLO 2017-1 Ltd./CFIP CLO 2017-1 LLC
Class A to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
NR--Not rated.
CFIP CLO 2017-1: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-R, C-R, D-R and E-R replacement notes and proposed new class
X notes from CFIP CLO 2017-1 Ltd., a CLO originally issued in
December 2017 that is managed by CFI Partners LLC.
The preliminary ratings are based on information as of Sept. 10,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Sept. 15, 2021 refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-R and E-R notes are
expected to be issued at a higher spread over three-month LIBOR
than the original notes.
-- New class X notes are expected to be issued at closing. These
notes are expected to be paid down using interest proceeds during
the first eight payment dates beginning with the payment date in
January 2022.
-- The stated maturity and reinvestment period will be extended
4.75 years.
-- The non-call period will be extended until September 2023.
-- The weighted average life test date will be extended to nine
years from the refinancing date.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
CFIP CLO 2017-1 Ltd./CFIP CLO 2017-1 LLC
Class X, $2.880 million: AAA (sf)
Class A-R, $300.250 million: AAA (sf)
Class B-R, $61.750 million: AA (sf)
Class C-R (deferrable), $28.500 million: A (sf)
Class D-R (deferrable), $28.500 million: BBB- (sf)
Class E-R (deferrable), $19.200 million: BB- (sf)
Subordinated notes, $44.073 million: Not rated
CITIGROUP COMMERCIAL 2018-C6: Fitch Rates J-RR Certs 'B-'
---------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Citigroup Commercial
Mortgage Trust 2018-C6 Commercial Mortgage Pass-Through
Certificates series 2018-C6 (CGCMT 2018-C6).
DEBT RATING PRIOR
---- ------ -----
CGCMT 2018-C6
A-1 17327GAV6 LT AAAsf Affirmed AAAsf
A-2 17327GAW4 LT AAAsf Affirmed AAAsf
A-3 17327GAX2 LT AAAsf Affirmed AAAsf
A-4 17327GAY0 LT AAAsf Affirmed AAAsf
A-AB 17327GAZ7 LT AAAsf Affirmed AAAsf
A-S 17327GBA1 LT AAAsf Affirmed AAAsf
B 17327GBB9 LT AA-sf Affirmed AA-sf
C 17327GBC7 LT A-sf Affirmed A-sf
D 17327GAA2 LT BBB-sf Affirmed BBB-sf
E-RR 17327GAC8 LT BBB-sf Affirmed BBB-sf
F-RR 17327GAE4 LT BBsf Affirmed BBsf
G-RR 17327GAG9 LT BB-sf Affirmed BB-sf
J-RR 17327GAJ3 LT B-sf Affirmed B-sf
X-A 17327GAU8 LT AAAsf Affirmed AAAsf
X-B 17327GAQ7 LT AA-sf Affirmed AA-sf
KEY RATING DRIVERS
Stable Performance: Overall pool performance and loss expectations
remain relatively stable since issuance. Nine loans (25.5% of pool)
are considered Fitch Loans of Concern (FLOCs), including one
specially serviced loan (3.7%). Fitch's current ratings incorporate
a base case loss of 5.90%.
The largest loss contributor is the 192 Lexington loan (1.9% of
pool), which is secured by a 132,049-sf office building located in
Manhattan. Property performance has steadily declined since
issuance due to multiple tenants vacating upon their 2019 lease
expirations, including top tenants, Broadway Suites III (previously
6.4% of NRA) and Silverson Pareres, Lombardi (5.1%). YE 2020
occupancy dropped to 78%, from 89% at YE 2019 and 91% at issuance.
The loan is now in cash management given the servicer-reported NOI
DSCR fell below 1.15x.
The property, which was built in 1926, has undergone a significant
renovation since issuance, including upgrades to the lobby,
roofdeck, three balconies, facade and entryway. Fitch's base case
loss of 36% incorporates an 8% cap rate to the YE 2020 NOI and
takes into consideration the property's strong location and
significant sponsor capital investment.
The second largest loss contributor is the Victory on 30th loan
(1.8%), which is secured by a 96-bed student housing property
located in Los Angeles, CA near the University of Southern
California campus. YE 2020 occupancy declined to 83.3% from 95% at
issuance, but has since improved to 90.6% as of March 2021. The
servicer-reported NOI DSCR was 1.11x as of March 2021, compared
with 1.14x at YE 2020, 1.12x at YE 2019 and 1.28x at issuance.
The lower NOI since issuance is primarily driven by increased
operating expenses, mainly payroll and benefits and general and
administrative expenses. Fitch's base case loss of 33% incorporates
a 10% stress to the YE 2020 NOI to account for potential student
housing performance volatility.
Another large loss contributor, the Cambridge Corporate Center loan
(6%), which is secured by a 349,823- sf office property located in
Charlotte, NC, was flagged as a FLOC due to declining occupancy and
significant upcoming lease rollover. Property occupancy has
declined since issuance after several tenants, including YodleWeb
Group (previously 9.7% of NRA), KCI USA (5.6%) and USI Insurance
Services (4.4%), vacated at or prior to their scheduled lease
expirations. As of June 2021, occupancy remained unchanged at 75%
from YE 2020, but has fallen significantly from 86.9% at YE 2019
and 96.5% at issuance. The servicer-reported YTD June 2021 NOI DSCR
fell to 1.61x from 1.77x at YE 2020 and 2.19x at YE 2019.
Additionally, approximately 28% of the NRA rolls in 2021 and 2022,
including the second largest tenant, General Motors (26.9% of NRA)
whose lease expires in July 2022. Fitch requested a leasing update
from the master servicer but has not received a response. This
partial interest only loan begins to amortize in 2023. Fitch's base
case loss of 9% reflects a 25% stress to the YE 2020 NOI due to the
performance declines and upcoming rollover concerns.
The specially serviced Holiday Inn FiDi loan (3.7%), which is
secured by a 492-key hotel property located in Manhattan's
Financial District, transferred to special servicing in April 2020
following the borrower's request for coronavirus-related relief.
The borrower initial request for forbearance was rejected. A cash
sweep has since been initiated and a loan modification is currently
under review by the servicer. Per the special servicer, the
moratorium is delaying foreclosure. The hotel re-opened for
business in April 2021 and the loan remains 90+ days delinquent.
Fitch's base case loss of 12% reflects a stressed-value per key of
approximately $169,000.
Minimal Change in Credit Enhancement: As of the August 2021
remittance, the pool's aggregate principal balance has been paid
down by 1.0% to $729 million from $736.4 million at issuance. No
loans are defeased. Fourteen loans (53% of pool) are full-term,
interest-only, including nine of the top 15 loans (45.6%) and 10
loans (24.3%) are partial interest-only, two (2.6%) of which have
begun to amortize.
Loans Impacted by the Pandemic: Hotel loans represent 18.7% of the
pool. Fitch ran an additional stress to the pre-pandemic cash flows
for three hotel loans given the significant declines to YE 2020 NOI
related to reduced reservations and/or temporary closures as a
result of the pandemic; this did not impact existing Rating
Outlooks.
Investment Grade Opinion Loans: Two loans (13.0% of pool), Dumbo
Heights (9.6%) and Moffett Towers - Buildings E, F and G (3.4%),
each received a stand-alone investment grade opinion of 'BBB-sf*'
at issuance.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades could be triggered by an increase in pool-level
losses from underperforming or specially serviced loans.
Downgrades to the classes rated 'AAAsf', 'AA-sf' and 'A-sf'
are not likely due to the high CE and continued stable
performance of the pool, but may occur at 'AAAsf' or 'AA-sf'
should interest shortfalls occur. Downgrades to the classes
rated 'BBB-sf' and below would occur if the performance of the
FLOCs and/or specially serviced loan continues to decline or
fails to stabilize.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with stable to improved asset
performance, coupled with additional paydown and/or
defeasance. Upgrades to the 'A-sf' and 'AA-sf' rated classes
could occur with significant improvement in CE and/or
defeasance and/or the stabilization to the properties impacted
from the coronavirus pandemic.
-- Upgrades of the 'BBB-sf' rated classes would be limited based
on the sensitivity to concentrations or the potential for
future concentrations. Classes would not be upgraded above
'Asf' if there is a likelihood of interest shortfalls. An
upgrade to the 'BB-sf' and 'B-sf' rated classes is not likely
until the later years in the transaction and only if the
performance of the remaining pool is stable and/or properties
vulnerable to the pandemic return to pre-pandemic levels, and
there is sufficient CE to the bonds.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COMM 2013-CCRE9: S&P Lowers Class F Certs Rating to 'D (sf)'
------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from COMM 2013-CCRE9
Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P
affirmed its ratings on eight other classes from the same
transaction.
Rating Actions
The downgrades on classes C, D, E, and F reflect credit support
erosion that S&P anticipates will occur upon the eventual
resolution of the six specially serviced assets and reduced
liquidity support available to these classes due to ongoing and
anticipated interest shortfalls. Classes E and F have outstanding
interest shortfalls as of the August 2021 trustee remittance
report.
S&P said, "The downgrades primarily reflect our revised loss and
recovery expectations on two of the six specially serviced assets
($152.3 million; 16.8% of pool). The two assets are Valley Hills
Mall ($57.9 million; 6.4%) and North Oaks ($23.6 million; 2.6%),
which we considered in our analysis using the most recent appraisal
value and/or updated broker opinion of values we received from the
special servicer. The updated valuations indicate losses that are
greater than our assumptions during the last review of the
transaction in August 2020. Furthermore, our 'CCC (sf)' rating on
class D reflects our view that the risk of default and losses on
the class remain elevated if North Oaks and Sarasota Square
experience increases in appraisal reduction amounts or if loans
with low reported debt service coverage get transferred to special
servicing.
"While the model-indicated rating on class A-M was lower than the
class' revised rating level, we affirmed the outstanding rating
because we qualitatively considered the class' relatively senior
position in the waterfall and the available as well as our
projected liquidity support available to the class.
"We affirmed our ratings on classes A-3, A-3FL, A-4, A-SB, A-3FX,
and B because the current rating levels were in line with the
model-indicated ratings. In addition, our rating on class A-3FL
reflects the receipt of the fixed interest rate regular interest.
All or a portions of the class A-3FL certificates may be exchanged
for the class A-3FX certificates.
"We affirmed our rating on the class X-A interest-only (IO)
certificate based on our criteria for rating IO securities, in
which the ratings on the IO securities would not be higher than
that of the lowest-rated reference class. The notional amount on
class X-A references classes A-1, A-2, A-SB, A-3, A-4, A-M, and
A-3FL."
Transaction Summary
As of the August 2021 trustee remittance report, the collateral
pool balance was $908.3 million, which is 70.0% of the pool balance
at issuance. The pool currently includes 69 loans, including three
real estate-owned (REO) assets, down from 81 loans at issuance. Six
assets ($152.3 million, 16.8%) are with the special servicer, 14
($230.3 million, 25.4%) are defeased, and 14 ($93.1 million, 10.3%)
are on the master servicer's watchlist.
S&P said, "Excluding the specially serviced assets and the defeased
loans using adjusted servicer-reported numbers, we calculated a
1.46x S&P Global Ratings weighted average debt service coverage
ratio (DSCR) and 87.6% S&P Global Ratings weighted average
loan-to-value (LTV) ratio using an 8.13% S&P Global Ratings
weighted average capitalization rate for the remaining loans. The
top 10 nondefeased loans have an aggregate outstanding pool trust
balance of $383.6 million (42.2%). Using adjusted servicer-reported
numbers and excluding assets with the special servicer, we
calculated an S&P Global Ratings weighted average DSCR of 1.43x and
LTV ratio of 93.9%.
"To date, the pool has experienced $66,504 in principal losses. We
expect losses to reach approximately 8.8% of the original pool
trust balance in the near term based on loss incurred to date and
additional losses we expect upon the eventual resolution of four of
the six the specially serviced assets. Two of the specially
serviced assets, The Hotel at Times Square ($32.9 million, 3.6%)
and Holiday Inn Express Wichita ($5.2 million, 0.6%), are expected
to be returned to the master servicer following discussions with
the special servicer regarding loan modifications or forbearance."
The Valley Hills Mall is the largest loan with the special servicer
($57.9 million, 6.4%) with an outstanding total exposure of $58.7
million. The property is a 936,682-sq.-ft. two-story enclosed
regional retail mall in Hickory, N.C., of which 325,166 sq. ft.
serves as collateral of the loan. The mall contains four
non-collateral anchor tenants (Belk, Dillard's, JC Penney, and
Sears) totaling 611,516 sq. ft. as well as five outparcel units.
Sears closed the store at this location in April 2020 following the
bankruptcy of its parent company. The loan was transferred to the
special servicer on Sept. 8, 2020, due to imminent default. The
special servicer, LNR Partners LLC, indicated that a receiver is in
place, the receiver has hired a broker to market the property, and
multiple offers are currently being reviewed.
At S&P's August 2020 review, the loan was on master servicer's
watchlist due to the borrower requesting COVID-19 relief, and the
loan transferred to the special servicer shortly after.
An appraisal reduction amount of $14.7 million is currently in
effect against the loan, based on the December 2020 appraisal value
of $33.1 million, down from $97.9 million at loan origination
issuance. Shortly after the loan transferred to special servicing,
the special servicer indicated that they are in discussions with
the borrower regarding a possible deed-in-lieu. S&P said, "With
this information, along with more recent valuation received, we no
longer expect the loan to be modified and returned to the master
servicer. Furthermore, given the uncertain resolution timing as
well as the continuing stress facing retail malls, we have
increased our expected loss on the loan to a level higher than that
implied by the recent appraisal value. We expect a significant loss
(greater than 60%) upon the eventual resolution of the loan."
The Hotel at Times Square is the second-largest loan with the
special servicer ($32.9 million, 3.6%) with an outstanding total
exposure of $32.9 million. The property consists of a 13-story
hotel building, an 11-story hotel building, and a four-story retail
building totaling 213 rooms and approximately 6,800 sq. ft. of
retail space. The property is located at 59 West 46th Street in the
Times Square district of Manhattan, New York. The loan was
transferred to the special servicer on Sept. 24, 2020, due to
COVID-19 forbearance request. The special servicer, LNR Partners
LLC, indicated that the lender and the borrower are currently in
discussion of possible relief alternatives. The loan remains
current in debt service payments. Given the potential for the loan
to be granted forbearance or modified, we expect the loan to be
return to the master servicer following a workout. S&P said, "Based
on a S&P Global Ratings cash flow of $2.6 million and a cap rate of
10.25%, we arrived at a value of $25.8 million for the property.
The four remaining assets with the special servicer each have
individual balances that represent less than 3.0% of the total pool
trust balance. We estimated total losses for three of the four
specially serviced assets, arriving at a weighted-average loss
severity of $35.4 million. As noted above, the borrower for the
Holiday Inn Express Wichita loan has agreed to relief terms, and
servicer counsel is working to document the modification. However,
we lowered the S&P Global Ratings value on this property to reflect
broker's opinion of value we received on the property.
Additionally, for the REO asset North Oaks, we increased our
estimated losses based on a more recent valuation provided by LNR
Partners LLC, and we now expect a moderate loss (26.0% to 59.0%)
upon the eventual resolution of the asset."
S&P will continue to monitor the transaction against the evolving
economic backdrop and, should there be any meaningful changes to
our performance expectations, will issue research- and/or
ratings-related updates as necessary.
Environmental, social, and governance (ESG) factors relevant to the
rating action:
-- Health and safety.
Ratings Lowered
COMM 2013-CCRE9 Mortgage Trust
Class C to 'BB (sf)' from 'BBB (sf)'
Class D to 'CCC (sf)' from 'B+ (sf)'
Class E to 'D (sf)' from 'CCC (sf)'
Class F to 'D (sf)' from 'CCC (sf)'
Ratings Affirmed
COMM 2013-CCRE9 Mortgage Trust
Class A-3: AAA (sf)
Class A-3FL: AAA (sf)
Class A-4: AAA (sf)
Class A-SB: AAA (sf)
Class A-M: AAA (sf)
Class B: A (sf)
Class X-A: AAA (sf)
Class A-3FX: AAA (sf)
COMM 2014-CCRE16: Fitch Affirms CC Rating on Class F Certs
----------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Deutsche Bank Securities,
Inc.'s COMM 2014-CCRE16 Mortgage Trust commercial mortgage
pass-through certificates. In addition, Fitch revised the Rating
Outlook for two classes to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
COMM 2014-CCRE16 Mortgage Trust
A-3 12591VAD3 LT AAAsf Affirmed AAAsf
A-4 12591VAE1 LT AAAsf Affirmed AAAsf
A-M 12591VAG6 LT AAAsf Affirmed AAAsf
A-SB 12591VAC5 LT AAAsf Affirmed AAAsf
B 12591VAH4 LT AA-sf Affirmed AA-sf
C 12591VAK7 LT A-sf Affirmed A-sf
D 12591VAQ4 LT BBsf Affirmed BBsf
E 12591VAS0 LT CCCsf Affirmed CCCsf
F 12591VAU5 LT CCsf Affirmed CCsf
PEZ 12591VAJ0 LT A-sf Affirmed A-sf
X-A 12591VAF8 LT AAAsf Affirmed AAAsf
X-B 12591VAL5 LT AA-sf Affirmed AA-sf
X-C 12591VAN1 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Stable to Improved Performance: Fitch's loss expectations are
generally stable since the last rating action. Two loans that were
in special servicing at the time of the last rating action have
returned to the master servicer as corrected loans and are current
on payments. This has contributed to the Rating Outlook revision
for classes C and PEZ to Stable from Negative.
Fitch's ratings incorporate a base case loss of 8.70%; Fitch also
ran additional sensitivities that stressed three hotel loans and
the largest loan in special servicing, indicating losses could
reach up to 9.55%. There are eight Fitch Loans of Concern (FLOC)
representing 25.7% of the pool, including two loans in special
servicing.
The largest FLOC is Sanibel Harbour Marriott Resort & Spa (8.6% of
the pool). The property has recently been renovated and is located
in close proximity to Sanibel Island. The subject experienced
significant performance decline in 2020 due to the pandemic. The
borrower requested a six-month waiver of FF&E reserve contributions
and a three-month deferral of seasonality reserve contributions in
March 2020. While a forbearance was never executed, the servicer
executed a consent agreement allowing the borrower to replace the
property manager in December 2020. The loan has never been
delinquent. It remains a FLOC due to the distressed performance in
2020. Fitch's base case analysis includes a 10% haircut to the YE
2019 NOI, which results in no modeled loss.
The second largest FLOC and largest contributor to Fitch's
projected losses is West Ridge Mall & Plaza (5.9% of the pool). The
collateral includes approximately 392,000 sf of inline space within
the 1.0 million-sf enclosed regional West Ridge Mall, and an
adjacent anchored retail center, located in Topeka, KS. The loan
transferred to special servicing in November 2018 for imminent
default and was foreclosed in December 2019. Over the last few
years, the mall has lost two anchor tenants and collateral
occupancy has fallen to 50% as of May 2021.
The most recent servicer site inspection for the REO asset
indicates the property is dated and foot traffic is very low. A
significant number of the mall's inline tenants have leases
expiring in the next year, and the anchor tenant at West Ridge
Plaza has a lease expiring in May 2022. The property is not
currently listed for sale. Fitch's base case analysis assumes a
stressed value which gives partial credit to the West Ridge Plaza
parcel and results in an 88% modeled loss severity. An additional
sensitivity scenario assumes a full loss to the loan, given
declining occupancy, tertiary market location and lack of liquidity
for regional malls.
Minimal Changes to Credit Enhancement: Although one loan was repaid
from the trust since the last rating action, there has been limited
improvement to credit support. As of the August 2021 distribution,
the pool has paid down by 22.9% to $820 million from $1.1 billion
at issuance. Since the last rating action, one loan was disposed
from the trust with better than expected recovery, and another loan
has been fully defeased. Defeased collateral now represents 13.4%
of the pool, up from 9.7% at the last rating action. The fifth
largest loan is an REO asset, and one other loan in special
servicing is delinquent. Two other loans (18.4% of the pool) are
full-term interest only.
All of the outstanding loans are scheduled to mature in 2024. Fitch
expects some adverse selection as loans mature and those with
strong credit metrics refinance, leading to increased pool
concentration. Interest shortfalls are currently impacting the
unrated class G up to class D. While outstanding interest to the
class D certificate has been partially repaid since the last rating
action, there is an increased propensity for missed interest as
loans reach their maturity dates, given the possibility that some
may not repay on time. This consideration has contributed to the
Negative Outlook on class D.
Loans Impacted by Pandemic: Four loans (16.4% of the pool) are
secured by lodging properties, three of which are flagged as FLOCs.
The hospitality industry suffered in 2020 due to reduced
reservations and/or temporary property closures related to the
pandemic. Three of the four loans backed by hotels exhibited
significant performance decline in 2020. In addition to the base
case treatment, these three loans were modeled with stresses to the
YE 2019 NOI ranging from 20% to 26% as a further test of cash flow
durability.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades could be triggered by an increase in pool-level
losses from underperforming or specially serviced loans.
Downgrades to the classes rated 'AAAsf' are not considered
likely due to position in the capital structure, but may occur
at 'AAAsf' or 'AA-sf' should interest shortfalls occur.
Downgrades to classes C and D may occur if overall pool
performance declines or loss expectations increase.
-- Downgrades to the distressed classes E and F are expected if
and when losses are realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades could be triggered by significantly improved
performance coupled with paydown and/or increased defeasance.
An upgrade to classes B and C could occur with stabilization
of the FLOCs, but would be limited as concentrations increase.
Classes would not be upgraded above 'Asf' if there is
likelihood of interest shortfalls.
-- Upgrades of class D would only occur with significant
improvement in credit enhancement and/or pool performance. An
upgrade to classes E and F is not likely unless performance
and valuation of West Ridge Mall & Plaza improves, or the loan
disposes with significantly better than expected recoveries.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
COMM 2014-CCRE16 Mortgage Trust has an ESG Relevance Score of '4'
for Exposure to Social Impacts due to retail exposure including an
REO regional mall which is currently underperforming as a result of
changing consumer preference to shopping, which has a negative
impact on the credit profile, and is relevant to the rating[s] in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COMM 2021-CCRE1: Fitch Affirms CC Rating on Class G Certs
---------------------------------------------------------
Fitch Ratings has downgraded one and affirmed nine classes of
German American Capital Corp., commercial mortgage pass-through
certificates, series 2012-CCRE1 (COMM 2012-CCRE1). The Rating
Outlooks remain Negative on six classes.
DEBT RATING PRIOR
---- ------ -----
COMM 2012-CCRE1
A-3 12624BAC0 LT AAAsf Affirmed AAAsf
A-M 12624BAF3 LT AAAsf Affirmed AAAsf
A-SB 12624BAD8 LT AAAsf Affirmed AAAsf
B 12624BAG1 LT Asf Downgrade AAsf
C 12624BAH9 LT Asf Affirmed Asf
D 12624BAL0 LT Bsf Affirmed Bsf
E 12624BAN6 LT Bsf Affirmed Bsf
F 12624BAQ9 LT CCCsf Affirmed CCCsf
G 12624BAS5 LT CCsf Affirmed CCsf
X-A 12624BAE6 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
High Loss Expectations/Regional Mall Fitch Loans of Concern
(FLOCs): The downgrade to class B and Negative Outlooks reflect
high loss expectations, particularly from two regional malls, which
comprise 25.6% of the remaining pool balance. Classes B through H
are reliant on proceeds from these malls for repayment.
Fitch's ratings reflect a base case loss of 9.80%. The Negative
Outlooks, reflect losses that could reach 14.30% when factoring in
a potential outsized loss of 50% on Crossgates Mall (17.6%). There
are 12 FLOCs (38.8% of pool), including one (8.0%) in special
servicing. The Stable Outlooks on the senior 'AAA' classes reflect
the high defeasance, sufficient credit enhancement and the
expectation of paydown from continued amortization.
The largest contributor to loss expectations, RiverTown Crossings
(8.0%), is secured by 635,769 sf of a 1.3 million-sf regional mall
in Grandville, MI. The loan, which is sponsored by Brookfield
Property Retail Group, transferred to special servicing in October
2020. The loan was scheduled to mature in June 2021. A cash
management account is trapping excess cash and the borrower and
lender are working on either modifying the debt or a
deed-in-lieu/foreclosure. Fitch's base case loss is 57%, implying a
32% cap rate on the YE 2019 NOI.
The mall is anchored by three non-collateral tenants: Macy's,
JCPenney and Kohl's. Non-collateral Sears closed in January 2021
and non-collateral Younkers closed in 2018. The collateral anchors
are Dick's, (14.4% net rentable area [NRA] through January 2025)
and Celebration Cinemas, (13.6% through December 2024). Collateral
occupancy was 85% as of March 2021 compared with 86% at YE 2020 and
93% as of March 2019. Servicer-reported NOI debt service coverage
ratio (DSCR) for this amortizing loan was 1.51x at YE 2020 down
from 1.82x at YE 2019. In-line tenant sales were $301 psf at YE
2020, down from $361 psf for the TTM ended March 2020. Near term
rollover includes 6.9% NRA in 2021 and 17.8% in 2022.
The second largest contributor to loss expectations, Crossgates
Mall (17.6%), is secured by 1.3 million sf of a 1.7 million-sf
regional mall in Albany, NY. The loan, which is sponsored by
Pyramid Management Group, transferred to special servicing in April
2020. The borrower received initial coronavirus relief, which
included deferral of six months of debt-service payments with
repayment beginning in January 2021. Further relief was provided
where the loan maturity was extended one year until May 2023 and
the deferred debt-service was deferred until the new maturity. The
loan was returned to the master servicer in June 2021 as a
corrected mortgage loan.
Macy's is the remaining non-collateral anchor after Lord and Taylor
closed at the end of 2020. JCPenney is the largest collateral
anchor (13.9% NRA through May 2023). The other collateral anchor
tenants are Regal Cinemas 18, Dick's, Burlington, Forever 21, Apex
Entertainment and Best Buy. Collateral occupancy excluding
specialty long term tenants was 85% as of June 2021 compared with
87% as of June 2020. Servicer-reported NOI DSCR for this amortizing
loan was 0.81x at YE 2020 down from 1.45x at YE 2019; DSCR has
rebounded to 1.42x as of the YTD June 2021. In-line tenant sales
prior to the pandemic were $590 psf ($430 excluding Apple) for the
TTM ended February 2020.
Fitch's base case loss of 24% reflects a 15% cap rate off the YE
2019 NOI. Fitch also performed an additional sensitivity analysis,
which assumed a potential outsized loss of 50% on the loan's
maturity balance to reflect the potential for the loan having
difficulty refinancing at maturity. The outsized loss modeled on
the Crossgates Mall loan contributed to the Negative Outlooks.
Exposure to Coronavirus Pandemic: Thirteen loans (42.9%) are
secured by retail properties, including the two largest retail mall
loans (25.6%). Five retail loans (28.7%) were designated FLOCs due
to performance declines and the potential sale and/or refinancing
risk . Five loans (6.5%) are secured by hotel properties, all of
which were designated FLOCs. The hotels experienced significant
performance challenges in 2020 due to reduced occupancy and/or
temporary property closures related to the pandemic. These loans
were modeled with a 26% stress to the YE 2019 NOI, which resulted
in minimal losses.
Increase in Credit Enhancement (CE): As of the August 2021
distribution date, the pool's aggregate balance has been reduced by
37.9% to $579.7 million from $932.8 million at issuance. Two loans
($92.6 million at prior rating action) paid in full with yield
maintenance. The entire pool is amortizing. Twelve loans (29.4%)
are defeased. Cumulative interest shortfalls of $371,399 are
currently affecting the non-rated class H.
Pool/Maturity Concentrations: Thirty-nine of the original 54 loans
remain. Maturities are concentrated in 2022 (74.4%). One loan
(8.0%) matures in 2021 and one (17.6%) in 2023.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades of classes A-3 and A-SB are not likely due to high
defeasance, sufficient CE, expected continued amortization and
paydown from non-FLOCs but would occur if interest shortfalls
occur. Downgrades of classes A-M and X-A would occur if
additional loans become FLOCs, interest shortfalls occur or if
performance of the FLOCs, primarily the regional mall FLOCs,
deteriorates further.
-- Classes B and C would be downgraded should additional loans
become FLOCs or if performance of the FLOCs declines further.
Classes D, E, F and G would be downgraded if loss expectations
increase or as losses are realized.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades are not likely due to high expected losses and
performance/refinance concerns with the regional mall FLOCs
but could occur if performance and/or refinance prospects
improve significantly.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
COMM 2012-CCRE1 has an ESG Relevance Score of '4' for Exposure to
Social Impacts due to malls that are underperforming as a result of
changing consumer preference to shopping, which has a negative
impact on the credit profile, and is relevant to the rating[s] in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CSAIL 2016-C7: Fitch Lowers 2 Debt Tranches to 'CCC'
----------------------------------------------------
Fitch Ratings has downgraded three and affirmed 10 classes of
Credit Suisse CSAIL 2016-C7 Commercial Mortgage Trust Mortgage Pass
Through Certificates. Fitch has also removed three classes from
Rating Watch Negative (RWN).
DEBT RATING PRIOR
---- ------ -----
CSAIL 2016-C7
A-4 12637UAV1 LT AAAsf Affirmed AAAsf
A-5 12637UAW9 LT AAAsf Affirmed AAAsf
A-S 12637UBA6 LT AAAsf Affirmed AAAsf
A-SB 12637UAX7 LT AAAsf Affirmed AAAsf
B 12637UBB4 LT AA-sf Affirmed AA-sf
C 12637UBC2 LT A-sf Affirmed A-sf
D 12637UAG4 LT BBsf Downgrade BBB-sf
E 12637UAJ8 LT CCCsf Downgrade Bsf
F 12637UAL3 LT CCCsf Affirmed CCCsf
X-A 12637UAY5 LT AAAsf Affirmed AAAsf
X-B 12637UAZ2 LT AA-sf Affirmed AA-sf
X-E 12637UAA7 LT CCCsf Downgrade Bsf
X-F 12637UAC3 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades and RWN removals
reflect increased loss expectations for the pool since Fitch's last
full rating review, driven primarily by higher loss expectations on
the Gurnee Mills loan (10.1% of the pool), exposure to regional
malls (26.9%) and the high percentage of Fitch Loans of Concern
(FLOCs). There are 13 FLOCs (39.4%), including three specially
serviced loans (2.0%), that have been flagged for declining
performance, significant upcoming lease rollover and/or
pandemic-related performance and refinance concerns.
Fitch's ratings incorporate a base case loss of 8.4%. The Negative
Rating Outlooks reflect losses that could reach 10.00% when
factoring in an outsized loss on the Gurnee Mills loan and
coronavirus-related stress on two hotel loans not in special
servicing.
Fitch Loans of Concern/Regional Malls: The largest contributor to
Fitch's base case loss is Gurnee Mills loan, which is secured by a
1.7 million sf portion of a 1.9 million sf regional mall located in
Gurnee, IL, approximately 45 miles north of Chicago. Non-collateral
anchors include Burlington Coat Factory, Marcus Cinema and Value
City Furniture. Collateral anchors include Macy's, Bass Pro Shops,
Kohl's and a vacant anchor box previously occupied by Sears, which
left in 2Q18.
Collateral occupancy declined to approximately 75% as of the June
2021 rent roll from 91% at issuance. In line tenant sales were
reported to be $325psf as of YE 2019 compared to $332psf for YE
2018, $313psf for YE 2017 and $347psf around the time of issuance
(as of TTM July 2016). Sales in 2020-2021 were requested but not
provided. The sponsor is Simon Property Group.
The loan transferred to the special servicer in June 2020 for
imminent monetary default related to the ongoing pandemic but was
returned to the master servicer in May 2021 after the borrower and
servicer agreed on a forbearance to defer the monthly payments from
May 2020 through February 2021. Beginning with the March 2021
payment, borrower began to repay the deferred amounts through
February 2023. Additionally, the loan was restructured to an
interest-only loan beginning in May 2020.
Fitch's base case loss of 31% reflects an implied cap rate of 12.6%
on YE 2019 NOI. Fitch also applied an additional sensitivity which
considered a potential outsized loss of 45%, which reflects an
implied cap rate of 15.8% on the YE 2019 NOI.
The second largest contributor to Fitch's base case loss is Coconut
Point (13.7%), which is secured by 836,531 sf of a 1.2 million sf
open-air, anchored retail property in Estero, FL approximately 20
miles from Fort Meyers. The loan, which is sponsored in a JV
between Simon Property Group and Dillard's, Inc., was designated a
FLOC due to occupancy declines and near-term rollover concerns.
The property is anchored by a non-collateral Super Target and a
non-collateral Dillard's. The largest collateral tenant is Regal
Cinemas, which leases 9.5% NRA through April 2024. Collateral
occupancy declined to 78% as of June 2021 from 82% at YE 2020 after
Bed Bath & Beyond, which leased 4.2% NRA through January 2022,
closed this location in February 2021. Collateral occupancy was 78%
at June 2021 compared to 90% at YE 2019 and 88% at issuance.
Servicer-reported NOI DSCR was 1.67x as of YE 2020 compared with
1.71x at YE 2019 and 1.54x at issuance. The loan began amortizing
in November 2018. Near-term rollover includes 3.2% in 2021 and
12.1% in 2022. Fitch's base case loss expectation of approximately
15% is based on a 10% cap rate and 20% total haircut to YE 2020
NOI.
The third largest contributor to Fitch's base case loss is
Peachtree Mall (3.1%), which is secured by 621,367 sf of an
822,443-sf regional mall located in Columbus, GA and sponsored by
Brookfield Properties Retail Group. The mall is anchored by a
non-collateral Dillard's and collateral tenants that include JC
Penney, At Home, and Macy's. Per the June 2021 rent roll, the
collateral was 87% occupied, which is down from 93% in 2020 and
from its previous high of 98% in 2018. Comparable inline sales were
$334psf for YE 2020, down from $383psf at YE 2019 and $409psf at
issuance.
Tenants comprising approximately 10% of the NRA have leases
scheduled to expire by YE 2022 and another 23% is scheduled to
expire in 2023, including At Home (13.8% NRA). Fitch's loss
expectation of 23% is based on a 20% stressed cap rate applied to
the YE 2020 NOI to account for the mall's declining sales and
occupancy given the secular consumer shift away from traditional
regional mall retail.
Alternative Loss Consideration: Fitch ran an additional sensitivity
scenario which applied a 45% outsized loss on Gurnee Mills to
address concerns due to regional mall weakness and declining
occupancy and tenant sales. In addition, this scenario includes
additional pandemic related stresses to two hotel loans not in
special servicing which addresses the potential that performance
does not recover to pre-pandemic levels and values decline. The
Negative Outlooks reflect this scenario. In addition, an ESG
relevance score of '4' for Social Impacts was applied as a result
of exposure to a sustained structural shift in secular preferences
affecting consumer trends, occupancy trends, and more, which, in
combination with other factors, impacts the ratings.
Credit Enhancement Improvement/Amortization: As of the August 2021
distribution date, the pool's aggregate principal balance has been
paid down by 9.7% to $692.8 million from $767.6 million at
issuance. The pool is scheduled to amortize by 16.2% of the initial
pool balance through maturity. Of the current pool, only one loan
(7.2%) is full-term interest-only, and one loan (1.7%) has a
partial-term interest-only period remaining. The pool has
experienced no realized losses since issuance. One loan (0.4%) has
been defeased.
Eight loans are scheduled to mature in 2025 (13.8% of pool), while
the majority of the pool is scheduled to mature in 2026 at 86.2%.
Coronavirus Exposure: There are six hotel loans (8.6% of the pool)
and 13 retail loans (41.6% of the pool).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool-level losses
from underperforming or specially serviced loans/assets.
Downgrades to the super-senior 'AAAsf'-rated classes, A-4
through A-SB, are not likely due to the high credit
enhancement (CE) and amortization, but could occur if there
are interest shortfalls, or if a high proportion of the pool
defaults and expected losses increase significantly. A
downgrade of one category to the junior 'AAAsf' rated class
(class A-S) and class X-A are possible should expected losses
for the pool increase significantly and/or should any of the
regional malls realize losses greater than expected.
-- A downgrade to classes B, C and X-B are possible should
performance of the FLOCs continue to decline, should loans
susceptible to the coronavirus pandemic not stabilize and/or
should further loans transfer to special servicing.
-- Downgrade to Class D, would occur should loss expectations
increase due to an increase in specially serviced loans, the
disposition of a specially serviced loan/asset at a high loss,
or a decline in the FLOCs' performance. The Outlooks on these
classes may be revised back to Stable if performance of the
FLOCs improves and/or properties vulnerable to the coronavirus
stabilize once the pandemic is over. Classes E, X-E, F, and X-
F could be further downgraded should losses become more
certain or be realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with stable to improved asset
performance, coupled with additional paydown and/or
defeasance. Upgrades to classes B and C are not expected but
would likely occur with significant improvement in CE and/or
defeasance and/or the stronger performance of the regional
malls. Upgrades of class D and below-rated classes are
considered unlikely and would be limited based on the
sensitivity to concentrations or the potential for future
concentrations.
-- Classes would not be upgraded above 'Asf' if there is a
likelihood of interest shortfalls. An upgrade to classes E, F,
X-E and X-F are not likely absent significant performance
improvement on the FLOCs and substantially higher recoveries
than expected on the specially serviced loans/assets.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
CSAIL 2016-C7 has an ESG Relevance Score of '4' for Exposure to
Social Impacts due to the pool's significant retail exposure,
including three regional malls in the top 15 that are currently
underperforming as a result of changing consumer preferences in
shopping, which has a negative impact on the credit profile and is
highly relevant to the ratings. This impact contributed to the
downgrade of classes D, E, and X-E and the Negative Outlooks on
classes A-S through D, X-A, and X-B.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CSMC 2016-NXSR: Fitch Affirms CC Rating on 4 Tranches
-----------------------------------------------------
Fitch Ratings has affirmed 19 classes of CSMC 2016-NXSR Commercial
Mortgage Trust pass-through certificates.
DEBT RATING PRIOR
---- ------ -----
CSMC 2016-NXSR
A-1 12594PAS0 LT AAAsf Affirmed AAAsf
A-2 12594PAT8 LT AAAsf Affirmed AAAsf
A-3 12594PAU5 LT AAAsf Affirmed AAAsf
A-4 12594PAV3 LT AAAsf Affirmed AAAsf
A-S 12594PAZ4 LT AAAsf Affirmed AAAsf
A-SB 12594PAW1 LT AAAsf Affirmed AAAsf
B 12594PBA8 LT AA-sf Affirmed AA-sf
C 12594PBB6 LT A-sf Affirmed A-sf
D 12594PAG6 LT BB-sf Affirmed BB-sf
E 12594PAJ0 LT CCsf Affirmed CCsf
F 12594PAL5 LT CCsf Affirmed CCsf
V-1B 12594PBD2 LT AA-sf Affirmed AA-sf
V-1C 12594PBE0 LT A-sf Affirmed A-sf
V1-A 12594PBC4 LT AAAsf Affirmed AAAsf
V1-D 12594PBF7 LT BB-sf Affirmed BB-sf
X-A 12594PAX9 LT AAAsf Affirmed AAAsf
X-B 12594PAY7 LT AA-sf Affirmed AA-sf
X-E 12594PAA9 LT CCsf Affirmed CCsf
X-F 12594PAC5 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Continued High Loss Expectations and High Concentration of Fitch
Loans of Concern: There are 13 Fitch Loans of Concern (FLOCs),
totaling 37.2% of the pool, including four specially-serviced loans
(9.9% of the pool). Fitch's current ratings incorporate a base case
loss of 8.4%. Fitch's analysis also included additional stresses
that indicate losses could reach 11%. The Negative Outlooks reflect
this stressed scenario.
Fitch Loans of Concern/Specially Serviced Loans: The largest FLOC
and largest contributor to losses is Gurnee Mills (9.6%), which is
secured by a 1.7 million-sf portion of a 1.9 million-sf regional
mall located in Gurnee, IL, approximately 45 miles north of
Chicago. Non-collateral anchors include Burlington Coat Factory,
Marcus Cinema and Value City Furniture. Collateral anchors include
Macy's, Bass Pro Shops, Kohl's and a vacant anchor box previously
occupied by Sears, which left in 2Q18.
Collateral occupancy declined to approximately 74.5% as of the YE
2020 rent roll from 91% at issuance. In-line tenant sales were
reported to be $325 psf as of YE 2019 compared to $332 psf for YE
2018, $313 psf for YE 2017 and $347 psf at issuance (as of TTM July
2016). The sponsor is Simon Property Group. Fitch's base case
analysis was based on a 12% cap rate and YE 2019 NOI, which
resulted in a 31.5% expected loss. The sensitivity scenario
resulted in a 45% loss severity.
The second largest contributor to losses, Wolfchase Galleria loan
(4.8%), is secured by a 391,862-sf interest in a regional mall
located in Memphis, TN. The subject is anchored by Macy's
(non-collateral), Dillard's (non-collateral), J.C. Penney
(non-collateral) and Malco Theatres. The loan transferred to
special servicing in June 2020 due to a monetary default, but was
subsequently returned to the master servicer in May 2021.
Collateral occupancy was 74% down from 78.8% at YE 2020 and 81.3%
at YE 2018. Leases representing 4.9% of the NRA roll in 2021,
followed by 14.4% in 2022 and 10.1% in 2023. The servicer reported
NOI DSCR was 1.17x at YE 2020, down from 1.29x at YE 2019 and 1.35x
at YE 2018. While the subject is the dominant mall in its trade
area, it is also located in a secondary market with fewer demand
drivers. Fitch requested a recent sales report from the servicer,
but has not received one to date. Fitch's base case loss of 27% was
based on a 15% cap rate and YE 2020 NOI. The sensitivity scenario
resulted in a 50% loss severity.
The largest specially serviced loan, Embassy Suites - Hillsboro
(5.1%), is secured by a 165-room full service hotel located in
Hillsboro, Oregon. The loan transferred to the special servicer in
June 2020 and is in foreclosure; the servicer and borrower have not
agreed on forbearance terms. Occupancy and DSCR were a reported 40%
and 0.15x respectively at YE 2020, down from 84% and 1.67x at of YE
2019. Fitch modeled losses of 6.3% based on a discount to a recent
appraisal; this results in a Fitch value per key of $180,000. The
remaining three loans in special are comprised of three hotels
(8.8%) and one retail property (1%).
Minimal Changes in Credit Enhancement: As of the August 2021
distribution date, the pool has paid down by nearly 3.3%, down to
$586.8 million from $606.8 million at issuance. Ten loans (54.1% of
the pool) are full-term interest only. Eight loans (11% of the
pool) were partial interest only; all have exited their interest
only period. The pool is only scheduled to pay down by 9.3% based
on scheduled maturity balances. There is one loan (1.1% of pool)
that has defeased. There have been no realized losses to date.
Alternative Loss Consideration: Fitch performed an additional
sensitivity scenario that assumed potential outsized losses of 9%
on The Charles Hotel, 10% on the current balance of 681 Fifth
Avenue, 45% on the current balance of Gurnee Mills, and 50% on the
current balance of Wolfchase Galleria. This scenario resulted in
the Stable Outlooks to classes A-1, A2, A-3, A-4 and A-SB. It
contributed to the Negative Outlooks for the remaining classes.
Coronavirus Exposure: Retail and hotel properties represent 37.3%
and 15.5% of the pool, respectively. Fitch's analysis applied
additional coronavirus-related stresses on one hotel loan to
account for potential cash flow disruptions.
Pool Concentrations and Pari Passu Loans: The largest loan
represents 10.2% of the pool and the top 10 loans represent 66.8%
of the pool. Nine loans (57.2%) are pari passu loan
participations.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Increase in pool-level losses from underperforming or
specially serviced loans;
-- Downgrades to the classes A-1 through A-S are not likely due
to their high CE but may occur should interest shortfalls
affect these classes;
-- Downgrades to the 'A-sf' through 'AA-sf' rated classes may
occur should expected losses for the pool increase
substantially and losses with respect to FLOCs become
imminent, which would erode CE;
-- Downgrades to the 'BB-sf' and below rated classes would occur
with greater certainty of loss or as losses are realized.
-- The Negative Outlooks reflect concerns with the FLOCs,
particularly retail properties. Further downgrades were
limited due to the uncertainty of losses on the regional
malls; Gurnee Mills and Wolfchase Galleria are current but
were previously in special servicing. Downgrades are possible
should performance at these assets deteriorate.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with pay down
and/or defeasance;
-- Upgrades to the 'A-sf' and 'AA-sf' rated classes are unlikely
but would occur with significant improvement in CE and/or
defeasance and higher than expected recoveries on specially
serviced loans and FLOCs while the remaining pool is stable;
however, adverse selection and increased concentrations, or
continued underperformance of the FLOCs, could cause this
trend to reverse;
-- Upgrades to the 'BB-sf' and below-rated classes are considered
unlikely due to losses from specially serviced loans and FLOCs
are expected to impact these classes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
CSMC 2016-NXSR has an ESG Relevance Score of '4' for Exposure to
Social Impacts due to the large exposure to underperforming
regional malls as a result of changing consumer preference to
shopping, which has a negative impact on the credit profile, and is
relevant to the rating[s] in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
EATON VANCE 2020-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-R, B-R, C-R, D-R, and E-R notes of Eaton Vance CLO 2020-1
Ltd./Eaton Vance CLO 2020-1 LLC, a CLO originally issued in August
2020. The CLO is managed by Eaton Vance Management, a wholly-owned
subsidiary of Eaton Vance Corp., which was acquired by Morgan
Stanley in March 2021 and will be integrated with Morgan Stanley
Investment Management.
On the Sept. 9, 2021 refinancing date, proceeds from the
replacement notes were used to redeem the original notes. At the
same time, S&P withdrew its ratings on the original notes and
assign ratings to the replacement notes.
The replacement notes were issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-R, and E-R notes were
issued at a lower spread over three-month LIBOR than the original
notes.
-- The stated maturity was extended by approximately four years
and reinvestment period was extended by approximately three years.
-- The documents had some updates, including the added ability to
purchase workout-related assets and bonds, as well as the capacity
to add contributions to the transaction to be applied for certain
permitted uses.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Eaton Vance CLO 2020-1 Ltd./Eaton Vance CLO 2020-1 LLC
Class A-R, $279.00 mil.: AAA (sf)
Class B-R, $63.00 mil.: AA (sf)
Class C-R (deferrable), $24.75 mil.: A (sf)
Class D-R (deferrable), $27.00 mil.: BBB- (sf)
Class E-R (deferrable), $20.25 mil.: BB- (sf)
Subordinated notes, $44.675 mil.: Not rated
Ratings Withdrawn
Eaton Vance CLO 2020-1 Ltd./Eaton Vance CLO 2020-1 LLC
Class A, to NR from AAA (sf)
Class B, to NR from AA (sf)
Class C, to NR from A (sf)
Class D, to NR from BBB- (sf)
Class E, to NR from BB- (sf)
NR--Not rated.
ELMWOOD CLO XI: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
XI Ltd./Elmwood CLO XI LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The preliminary ratings are based on information as of Sept. 10,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO XI Ltd./Elmwood CLO XI LLC
Class A, $320.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $18.00 million: BB- (sf)
Subordinated notes, $43.00 million: Not rated
FORT WASHINGTON 2021-2: S&P Assigns BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Fort Washington CLO
2021-2 Ltd./Fort Washington CLO 2021-2 LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Fort Washington Investment Advisors
Inc.
The ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Fort Washington CLO 2021-2 Ltd./Fort Washington CLO 2021-2 LLC
Class A, $315.00 million: AAA (sf)
Class B, $65.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $25.00 million: BBB (sf)
Class E (deferrable), $22.50 million: BB- (sf)
Subordinated notes, $46.03 million: Not rated
FOURSIGHT CAPITAL 2020-1: Moody's Ups Rating on Cl. F Notes to Ba2
------------------------------------------------------------------
Moody's Investors Service has upgraded 10 classes of bonds issued
from five Foursight Capital Automobile Receivables Trust. The notes
are backed by a pool of retail automobile loan contracts originated
by Foursight Capital LLC (Foursight; Unrated), who is also the
servicer and administrator for these transactions.
The complete rating actions are as follows:
Issuer: Foursight Capital Automobile Receivables Trust 2018-1
Class F Notes, Upgraded to Baa2 (sf); previously on Jun 24, 2021
Upgraded to Baa3 (sf)
Issuer: Foursight Capital Automobile Receivables Trust 2018-2
Class E Notes, Upgraded to Aaa (sf); previously on Jun 24, 2021
Upgraded to Aa1 (sf)
Class F Notes, Upgraded to Ba1 (sf); previously on Jun 24, 2021
Upgraded to Ba2 (sf)
Issuer: Foursight Capital Automobile Receivables Trust 2019-1
Class E Notes, Upgraded to Aa2 (sf); previously on Jun 24, 2021
Upgraded to A1 (sf)
Class F Notes, Upgraded to Ba2 (sf); previously on Jun 24, 2021
Upgraded to Ba3 (sf)
Issuer: Foursight Capital Automobile Receivables Trust 2020-1
Class D Notes, Upgraded to Aaa (sf); previously on Jun 24, 2021
Upgraded to Aa2 (sf)
Class E Notes, Upgraded to A2 (sf); previously on Jun 24, 2021
Upgraded to A3 (sf)
Class F Notes, Upgraded to Ba2 (sf); previously on Jun 24, 2021
Upgraded to B1 (sf)
Issuer: Foursight Capital Automobile Receivables Trust 2021-1
Class B Notes, Upgraded to Aaa (sf); previously on Jun 24, 2021
Upgraded to Aa2 (sf)
Class C Notes, Upgraded to Aa2 (sf); previously on Jun 24, 2021
Upgraded to A1 (sf)
RATINGS RATIONALE
The upgrades are primarily driven by the buildup of credit
enhancement due to structural features including a sequential pay
structure, non-declining reserve account and overcollateralization
as well as a reduction in Moody's cumulative net loss expectations
for the underlying pools.
Moody's lifetime cumulative net loss expectations range between
7.75% to 9.0% for the above listed transactions. The loss
expectations reflect updated performance trends on the underlying
pools. More recently US consumers have shown a high degree of
resilience owing to the government stimulus and the relief options
offered by servicers.
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
September 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are greater than necessary to
protect investors against current expectations of loss could lead
to an upgrade of the ratings. Losses could decline from Moody's
original expectations as a result of a lower number of obligor
defaults or greater recoveries from the value of the vehicles
securing the obligors promise of payment. The US job market and the
market for used vehicles are also primary drivers of the
transaction's performance. Other reasons for better-than-expected
performance include changes in servicing practices to maximize
collections on the loans or refinancing opportunities that result
in a prepayment of the loan.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could lead to a
downgrade of the ratings. Losses could increase from Moody's
original expectations as a result of a higher number of obligor
defaults or a deterioration in the value of the vehicles securing
the obligors promise of payment. The US job market and the market
for used vehicles are also primary drivers of the transaction's
performance. Other reasons for worse-than-expected performance
include poor servicing, error on the part of transaction parties,
lack of transactional governance and fraud.
ICG US 2014-1: Moody's Assigns Ba3 Rating to $20MM Cl. D-R2 Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
refinancing notes issued by ICG US CLO 2014-1, Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$3,400,000 Class X-R Senior Secured Floating Rate Notes Due 2034,
Assigned Aaa (sf)
US$173,000,000 Class A-1a-2 Senior Secured Floating Rate Notes Due
2034, Assigned Aaa (sf)
US$51,000,000 Class A-1b-2 Senior Secured Fixed Rate Notes Due
2034, Assigned Aaa (sf)
US$29,750,000 Class A-2a-2 Senior Secured Floating Rate Notes Due
2034, Assigned Aa2 (sf)
US$7,000,000 Class A-2b-2 Senior Secured Fixed Rate Notes Due 2034,
Assigned Aa2 (sf)
US$16,500,000 Class B-R2 Senior Secured Deferrable Floating Rate
Notes Due 2034, Assigned A2 (sf)
US$23,000,000 Class C-R2 Senior Secured Deferrable Floating Rate
Notes Due 2034, Assigned Baa3 (sf)
US$20,000,000 Class D-R2 Senior Secured Deferrable Floating Rate
Notes Due 2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans, cash, and eligible investments, and up to 10.0% of the
portfolio may consist of second lien loans, unsecured loans and
senior secured bonds.
ICG Debt Advisors LLC (the "Manager") will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; and changes to the
overcollateralization test levels; the inclusion of Libor
replacement provisions; additions to the CLO's ability to hold
workout and restructured assets; changes to the definition of
"Adjusted Weighted Average Rating Factor" and changes to the base
matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $350,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2900
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.00 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
JP MORGAN CHASE 2007-CIBC20: S&P Lowers Class D Certs Rating to 'D'
-------------------------------------------------------------------
S&P Global Ratings lowered its rating to 'D (sf)' from 'B- (sf)' on
the class D commercial mortgage pass-through certificates from
JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC20, a
U.S. CMBS transaction.
The downgrade reflects principal losses on the affected bond as
detailed in the transaction's August 2021 trustee remittance
report.
According to the trustee remittance report, the class D certificate
experienced $18.3 million in principal losses this period due
primarily to the liquidation of three specially serviced assets
from the trust. Based on the August 2021 trustee remittance report,
the Clark Tower, Gannttown, and Fairfield Inn-Fayetteville, N.C.,
assets were liquidated from the trust. The assets' liquidation
resulted in a realized loss to the trust of $76.5 million, which
resulted in principal losses being experienced by classes D, E, F,
and G.
JPMCC COMMERCIAL 2015-JP1: Fitch Lowers Class G Certs to 'CCC'
--------------------------------------------------------------
Fitch Ratings has downgraded two classes and affirmed 13 classes of
JPMCC Commercial Mortgage Securities Trust, commercial mortgage
pass-through certificates, series 2015-JP1 (JPMCC 2015-JP1).
DEBT RATING PRIOR
---- ------ -----
JPMCC 2015-JP1
A-2 46590KAB0 LT PIFsf Paid In Full AAAsf
A-3 46590KAC8 LT AAAsf Affirmed AAAsf
A-4 46590KAD6 LT AAAsf Affirmed AAAsf
A-5 46590KAE4 LT AAAsf Affirmed AAAsf
A-S 46590KAG9 LT AAAsf Affirmed AAAsf
A-SB 46590KAF1 LT AAAsf Affirmed AAAsf
B 46590KAH7 LT AA-sf Affirmed AA-sf
C 46590KAK0 LT A-sf Affirmed A-sf
D 46590KAL8 LT BBBsf Affirmed BBBsf
E 46590KBA1 LT BBB-sf Affirmed BBB-sf
F 46590KAS3 LT Bsf Downgrade BBsf
G 46590KAU8 LT CCCsf Downgrade B-sf
X-A 46590KAN4 LT AAAsf Affirmed AAAsf
X-B 46590KAP9 LT AA-sf Affirmed AA-sf
X-D 46590KAR5 LT BBBsf Affirmed BBBsf
X-E 46590KAY0 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations: While much of the pool continues to
exhibit stable performance, loss expectations have increased
primarily due to loans in special servicing. There are nine Fitch
Loans of Concern (FLOCs; 21.7% of pool), including four specially
serviced loans (10.4%). The downgrades to classes F and G reflect
the increased loss expectations as well as the erosion in credit
enhancement due to realized losses.
Fitch's current ratings incorporate a base case loss of 5.1%.
Losses could reach 6.7% when factoring additional
coronavirus-related stresses.
Largest Contributors to Loss: The largest contributor to loss is
the Franklin Ridge loans, which are three cross-collateralized and
cross-defaulted loans secured by three suburban office properties
located adjacent to each other, in Nottingham, MD.
The loans transferred to special servicing in February 2021 due to
payment default after major tenant Johns Hopkins vacated upon
December 2020 lease expiration. Occupancy across the portfolio is
now less than 50%, and the loan is in payment default. The borrower
has requested release of a portion of lockbox funds to pay vendors
for critical services. There is a modification request under
consideration. A receiver is in the process of being appointed.
Fitch has an outstanding request with the servicer for an update on
modification discussions and has not received a response to date.
Fitch modelled a loss of approximately 21% which reflects a value
of $104 psf.
The second largest contributor to loss is the DoubleTree Tulsa
Warren Place loan (3%), which is secured by a 370 key full service
hotel located in Tulsa, OK. Tulsa is largely driven by the volatile
oil & gas industry. However, Tulsa has been able to diversify its
economy in recent years with a mix of industries. The loan
transferred to special servicing in April 2020 due to payment
default as a result of the pandemic. According to servicer updates,
the property is under contract for sale with a closing date set for
September 2021.
Fitch modelled a loss of approximately 30% which reflects a value
of $40,541 per key.
The third largest contributor to loss is the Nine loan (6.4%),
which is secured by a mixed-use development comprised of a hotel,
apartments and a parking garage. The development is located in
Cleveland, OH in the Playhouse Square District, which is the
largest performing arts center outside of New York City. Fitch has
an outstanding request for updated YE 2020 financials but has not
received them to date. The servicer-reported NOI DSCR was 1.85x at
YE 2019, compared with 2.05x at YE 2018.
Fitch modeled a loss of approximately 7% in the base case. In the
sensitivity scenario, Fitch modeled a loss of 22%, which applied a
26% haircut to the YE 2019 NOI to reflect performance declines from
the pandemic.
Increased Credit Enhancement to Senior Classes: As of the August
2021 distribution date, the pool's aggregate balance has been paid
down by 25% to $599.8 million from $799.2 million at issuance.
Three loans representing 32.6% of the pool are full-term
interest-only, and loans with partial interest-only periods
expired. There has been $24.8 million in realized losses to date,
all of which have gone to the non-rated class and have occurred
since the prior rating action due to the disposal of three loans.
Additionally, four loans have paid off at or post maturity. The
largest loan disposed was the sixth largest loan at issuance,
Holiday Inn Baltimore Inner Harbor. The outstanding balance prior
to the loans paying off/disposed were $162.3 million.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to classes A-3 through B are not likely due to
their position in the capital structure and the high credit
enhancement; however, downgrades to these classes may occur
should interest shortfalls occur. Downgrades to classes C and
D would occur if loss expectations increase significantly
and/or should credit enhancement be eroded.
-- Downgrades to the classes E and F would occur if the
performance of the FLOC continues to decline and/or fail to
stabilize, or should losses from specially serviced
loans/assets be larger than expected. The distressed class
'CCCsf' could be further downgraded as losses are realized or
become more certain.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to classes 'AA-sf' and 'A-sf' would likely occur with
significant improvement in credit enhancement and/or
defeasance; however, adverse selection and increased
concentrations, or the underperformance of the FLOCs, could
reverse this trend. An upgrade to the 'BBBsf' class D is
considered unlikely and would be limited based on sensitivity
to concentrations or the potential for future concentration.
-- Classes would not be upgraded above 'Asf' if there were
likelihood for interest shortfalls. An upgrade to classes E, F
and G are not considered likely but could be possible if loans
in special servicing return to performing or have better than
expected recoveries.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
MAGNETITE XXVI: Moody's Assigns Ba3 Rating to $30.15MM E-R Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
CLO refinancing notes issued and one class of loans incurred by
Magnetite XXVI, Limited (the "Issuer").
Moody's rating action is as follows:
US$208,500,000 Class A-1 Loans maturing 2034, Assigned Aaa (sf)
Up to US$408,700,000 Class A-1-R Senior Secured Floating Rate Notes
Due 2034, Assigned Aaa (sf)
US$26,800,000 Class A-2-R Senior Secured Floating Rate Notes Due
2034, Assigned Aaa (sf)
US$73,700,000 Class B-R Senior Secured Floating Rate Notes Due
2034, Assigned Aa2 (sf)
US$33,500,000 Class C-R Deferrable Mezzanine Secured Floating Rate
Notes Due 2034, Assigned A2 (sf)
US$43,550,000 Class D-R Deferrable Mezzanine Secured Floating Rate
Notes Due 2034, Assigned Baa3 (sf)
US$30,150,000 Class E-R Deferrable Mezzanine Secured Floating Rate
Notes Due 2034, Assigned Ba3 (sf)
The Refinancing Notes and Class A-1 Loans listed above are referred
to herein, collectively, as the "Rated Debt."
On the closing date, the Class A-1 Loans and the Class A-1-R Notes
have a principal balance of $208,500,000 and $200,200,000,
respectively. At any time, the Class A-1 Loans may be converted in
whole or in part to Class A-1-R Notes, thereby decreasing the
principal balance of the Class A-1 Loans and increasing, by the
corresponding amount, the principal balance of the Class A-1-R
Notes. The aggregate principal balance of the Class A-1 Loans and
Class A-1-R Notes will not exceed $408,700,000, less the amount of
any principal repayments.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 90%
of the portfolio must consist of senior secured loans, cash, and
eligible investments, up to 10% of the portfolio may consist of
second lien loans, unsecured loans, senior secured bonds and senior
unsecured bonds and up to 5% of the portfolio may consist of senior
secured bonds and senior unsecured bonds.
BlackRock Financial Management, Inc. (the "Manager") will continue
to direct the selection, acquisition and disposition of the assets
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Rated Debt and additional
subordinated notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test
levels; the inclusion of Libor replacement provisions; additions to
the CLO's ability to hold workout and restructured assets; changes
to the definition of "Adjusted Weighted Average Rating Factor" and
changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $670,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2876
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.25%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Debt.
MERIDIANLINK INC: Moody's Assigns 'B2' CFR Amid Recent IPO
----------------------------------------------------------
Moody's Investors Service assigned new ratings to MeridianLink,
Inc. with a corporate family rating of B2, a probability of default
rating of B2-PD, and a speculative grade liquidity rating of SGL-1.
Concurrently, Moody's downgraded the senior secured first lien
credit facility of the company's Project Angel Holdings, LLC
subsidiary to B2 from B1. The rating action was driven by the
announced repayment of $75.0 million of borrowings outstanding
under the first lien credit agreement and all $125.0 million of
Project Angel's second lien debt with most of the proceeds from
MeridianLink's recent IPO. [1]The resulting deleveraging from just
above 5x to less than 4x on a pro forma LTM basis as of June 30,
2021 meaningfully strengthens the company's credit profile, but
removes the first loss support to Project Angel's first lien credit
facility ratings previously provided by the second lien debt. The
CFR and PDR of Project Angel have been withdrawn. The ratings
outlook is stable.
Downgrades:
Issuer: Project Angel Holdings, LLC
Senior Secured First Lien Bank Credit Facility, Downgraded to B2
(LGD4) from B1(LGD3)
Withdrawals:
Issuer: Project Angel Holdings, LLC
Corporate Family Rating, Withdrawn, previously rated B2
Probability of Default Rating, Withdrawn, previously rated B2-PD
Issuer: Project Angel Holdings, LLC
Outlook, Remains Stable
Assignments:
Issuer: MeridianLink, Inc.
Corporate Family Rating, Assigned B2
Probability of Default Rating, Assigned B2-PD
Speculative Grade Liquidity Rating, Assigned SGL-1
Issuer: MeridianLink, Inc.
Outlook, Assigned Stable
RATINGS RATIONALE
MeridianLink's B2 CFR is principally constrained by the company's
moderate pro forma trailing debt to EBITDA leverage of less than 4x
(Moody's adjusted for operating leases) as well as its limited
scale and a concentrated vertical market focus as a software
provider for banks, credit unions, mortgage lenders, and other
financial services providers. MeridianLink's credit quality is also
negatively impacted by its concentrated equity ownership and the
risk of incremental debt-financed acquisitions which are indicative
of an aggressive financial strategy that presents governance and
re-leveraging risk. Business risks are partially offset by
MeridianLink's solid presence as provider of SaaS based solutions
within its target market of financial services clients, high
revenue predictability driven by historically strong retention
rates, and a capital structure supported by a meaningful equity
cushion. The company's credit quality also benefits from
MeridianLink's strong profitability margins and expectations of
healthy free cash flow generation.
The B2 rating for Project Angel's first lien senior secured credit
facility reflects MeridianLink's B2-PD PDR and a loss given default
("LGD") assessment of LGD4. Following the repayment of Project
Angel's second lien borrowings, the rating on the first lien credit
facility was downgraded to be consistent with the CFR as the
company's pro forma debt structure is almost entirely comprised of
this single class of debt.
The company's financial results summarized in the 2020 audited
annual report were consolidated under Project Angel Parent, LLC
("Parent") which was renamed MeridianLink following completion of
the recent IPO. This entity owns 100% of the outstanding member
units of Project Angel Intermediate Holdings, LLC ("Intermediate"),
which owns the borrowing entity Project Angel. Parent does not
presently provide a guarantee to the credit facility and Moody's
cannot definitively verify the assets, liabilities, and cash flows
pledged to the credit group. Negative rating actions, including the
withdrawal of current ratings, could occur if sufficient financial
information or proper credit support is not received.
MeridianLink's SGL-1 rating reflects the company's very good
liquidity that is supported a pro forma cash balance of
approximately $70 million (post IPO) as well as Moody's expectation
of free cash flow generation as a percentage of debt in the low to
mid teens range (before factoring in extraordinary working capital
related outflows) in the next 12 months. The company's liquidity is
also bolstered by an undrawn $35 million revolving credit facility.
While MeridianLink's term loans are not subject to financial
covenants, the revolving credit facility has a springing covenant
based on a maximum net first lien leverage ratio which the company
should be comfortably in compliance with over the next 12-18
months.
The stable ratings outlook reflects Moody's expectation that
MeridianLink's revenues will expand at a mid single digit rate (pro
forma for acquisitions) in 2021 with EBITDA growing at a more
modest pace during this period due to higher operating cost
assumptions. Accordingly, debt leverage (Moody's adjusted) is
projected to approximate 3.7x at the end of 2021.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The rating could be upgraded if the company realizes meaningful
revenue and EBITDA growth while adhering to a conservative
financial policy and sustaining or improving upon its strong pro
forma credit metrics.
The rating could be downgraded if the company were to experience a
weakening competitive position, revenue contracts and cash flow
generation weakens, or the company maintains aggressive financial
policies such that debt leverage is sustained above 6.5x and annual
free cash flow/debt contracts to below 5%.
MeridianLink, which recently completed an IPO, but is principally
owned by Thoma Bravo, LLC ("Thoma Bravo"), is a leading provider of
SaaS-based software solutions to financial institutions to support
loan and deposit account origination and related workflow
applications. Moody's projects that the company will generate
revenues of approximately $250 million in 2021.
The principal methodology used in these ratings was Software
Industry published in August 2018.
MONROE CAPITAL XII: Moody's Gives Ba3 Rating to $30MM Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued and one class of loans incurred by Monroe Capital MML
CLO XII, Ltd. (the "Issuer" or "Monroe XII").
Moody's rating action is as follows:
Issuer: Monroe Capital MML CLO XII, Ltd.
US$5,000,000 Class X Senior Floating Rate Notes Due 2033,
Definitive Rating Assigned Aaa (sf)
US$90,000,000 Class A Senior Floating Rate Loans Maturing 2033,
Definitive Rating Assigned Aaa (sf)
Up to US$282,500,000 Class A-1 Senior Floating Rate Notes Due 2033,
Definitive Rating Assigned Aaa (sf)
US$10,000,000 Class A-2 Senior Fixed Rate Notes Due 2033,
Definitive Rating Assigned Aaa (sf)
US$32,500,000 Class B Floating Rate Notes Due 2033, Definitive
Rating Assigned Aa2 (sf)
US$41,250,000 Class C Deferrable Mezzanine Floating Rate Notes Due
2033, Definitive Rating Assigned A2 (sf)
US$43,750,000 Class D Deferrable Mezzanine Floating Rate Notes Due
2033, Definitive Rating Assigned Baa3 (sf)
US$30,000,000 Class E Deferrable Mezzanine Floating Rate Notes Due
2033, Definitive Rating Assigned Ba3 (sf)
The notes and loans listed are referred to herein, collectively, as
the "Rated Debt."
On the closing date, the Class A Loans and the Class A-1 Notes have
a principal balance of $90,000,000 and $192,500,000, respectively.
At any time, the Class A Loans may be converted in whole to Class
A-1 Notes, thereby decreasing the principal balance of the Class A
Loans and increasing, by the corresponding amount, the principal
balance of the Class A-1 Notes. The aggregate principal balance of
the Class A Loans and Class A-1 Notes will not exceed $282,500,000,
less the amount of any principal repayments.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Monroe XII is a managed cash flow CLO. The issued notes will be
collateralized primarily by middle market and broadly syndicated
senior secured corporate loans. At least 95.0% of the portfolio
must consist of senior secured loans and eligible investments, and
up to 5.0% of the portfolio may consist of second lien loans and
unsecured loans. The portfolio is approximately 80% ramped as of
the closing date.
Monroe Capital CLO Manager LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four year
reinvestment period. Thereafter, the manager may not reinvest in
new assets and all principal proceeds will be used to amortize the
Rated Debt in accordance with the priority of payments.
In addition to the Rated Debt, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 31
Weighted Average Rating Factor (WARF): 3479
Weighted Average Spread (WAS): 4.75%
Weighted Average Recovery Rate (WARR): 45.5%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Debt.
MORGAN STANLEY 2013-C11: Fitch Lowers Class E Certs to 'C'
----------------------------------------------------------
Fitch Ratings has downgraded eight and affirmed four classes of
Morgan Stanley Bank of America Merrill Lynch Trust commercial
mortgage pass-through certificates, series 2013-C11.
DEBT RATING PRIOR
---- ------ -----
MSBAM 2013-C11
A-3 61762TAD8 LT AAAsf Affirmed AAAsf
A-4 61762TAE6 LT Asf Downgrade AAAsf
A-AB 61762TAC0 LT AAAsf Affirmed AAAsf
A-S 61762TAG1 LT BBB-sf Downgrade Asf
B 61762TAH9 LT B-sf Downgrade BBsf
C 61762TAK2 LT CCsf Downgrade Bsf
D 61762TAN6 LT CCsf Downgrade CCCsf
E 61762TAQ9 LT Csf Downgrade CCCsf
F 61762TAS5 LT Csf Affirmed Csf
G 61762TAU0 LT Dsf Affirmed Dsf
PST 61762TAJ5 LT CCsf Downgrade Bsf
X-A 61762TAF3 LT Asf Downgrade AAAsf
KEY RATING DRIVERS
Increased Certainty of Loss: The downgrades are based on the
increasing certainty of loss on the specially serviced loans,
particularly Westfield Countryside and the Mall at Tuttle Crossing.
Eight loans (59.8%) have been designated as Fitch Loans of Concern
(FLOC) including the three specially serviced loans (39.4%).
Fitch's current ratings reflect a base case loss of 21.1%. The
Negative Outlooks reflect losses that could reach 25.9% after
factoring in potential outsized losses on the specially serviced
malls.
Largest Drivers to Loss: Westfield Countryside (16.6%), a regional
mall located in Clearwater, FL, transferred to special servicing in
June 2020 due to imminent monetary default. The borrower (a joint
venture between Westfield and O'Connor Capital Partners) indicated
that they would no longer support the asset and have cooperated
with a friendly foreclosure. A receiver was installed in January
2021. The mall faces competition from three regional malls within a
15-mile radius, including one which shares the same sponsor.
The subject is anchored by Macy's, Dillard's, and JC Penney. Sears,
a non-collateral anchor, closed in July 2018 after downsizing its
space to accommodate a 37,000-sf Whole Foods. Per the March 2021
rent roll, total mall occupancy was 83% and collateral occupancy
was 93%. Inline sales were $375 psf at YE 2020 compared to $367 psf
at YE 2019, $383 at YE 2018 and $396 at issuance. Fitch modeled a
52% loss in its base case which implies a 15% cap rate to YE 2020
NOI. Due to potential further volatility, an additional sensitivity
was performed, which assumed a potential outsized loss of 70% on
the loan's maturity balance. This additional sensitivity implies a
20% cap rate off the YE 2020 NOI.
The Mall at Tuttle Crossing loan (15.0%), a regional mall located
in Dublin, OH, transferred to special servicing in July 2020; in
August 2020 the sponsor, Simon Property Group, disclosed that they
plan to return the collateral to the lender. The non-collateral
anchors include JCPenney and Scene 75. Comparable in-line tenant
sales were $299 psf in 2019, compared to $324 in 2018, $337 psf in
2017 and $365 psf in 2016. Fitch modeled a 53% loss in its base
case which implies a 20% cap rate off the YE 2020 NOI. An
additional sensitivity was performed, assuming an outsized loss of
65% on the loan's maturity balance. This additional sensitivity
implies a 25% cap rate off the YE 2020 NOI.
Southdale Center (8.5%) is a 1.2 million sf mall in Edina, MN in
the Minneapolis-St. Paul metro area. Herberger's (an affiliate of
Bon-Ton and collateral anchor) closed in August 2018 as part of
Bon-Ton's bankruptcy proceedings. JC Penney, a non-collateral
anchor, closed in June 2017, leaving only one anchor (Macy's) open
at the mall. Per the March 2021 rent roll, total mall occupancy was
65% and collateral occupancy was 48%. Despite the dark anchor
spaces, the borrower has undertaken an extensive redevelopment plan
at the property.
The former JC Penney box has been demolished and a 120,000 sf Life
Time Fitness and approximately 35,000 sf of office space was
completed in late 2019. Additional development on outparcels
includes a 146-key Homewood Suites by Hilton that opened in
September 2018; a four-story Restoration Hardware showroom; a 3,800
sf Shake Shack; and a three-building, 232-unit multifamily property
that opened in July 2015. Fitch modeled a loss of approximately 23%
which incorporates a 12.5% cap rate and 5% haircut to the YE 2020
NOI.
The Marriott Chicago River North Hotel (7.9%) is a 523-key extended
stay property consisting of two hotels (Springhill Suites and
Residence Inn). The loan transferred to special servicing in July
2020 for payment default. The special servicer is dual-tracking
loan modification discussions with the borrower and foreclosure.
Per the June 2021 STR reports, both properties reported current
month RevPAR rates that were significantly better than the trailing
three month and trailing-twelve-month rates. Fitch modeled a loss
of approximately 10% due to the specially serviced/delinquent loan
status.
Alternative Loss Considerations: Due to the majority of losses
attributable to a few assets, Fitch also ran additional scenarios
to assess the impact and timing of losses. The additional
sensitivities support the downgrades; the timing of the losses
related to the malls contributed to the affirmation of the A-3 and
A-AB classes. The outsized losses on the Westfield Countryside and
the Mall at Tuttle Crossing contributed to the Negative Rating
Outlooks.
Minimal Change to Credit Enhancement (CE): As of the August 2021
distribution date, the pool's aggregate principal balance has paid
down by 33.6% to $568.5 million from $856.3 million at issuance.
Interest shortfalls are currently affecting classes C, D, E, F, G,
and J. Five loans (12.1%) have been defeased. Of the current pool,
seven loans (52.4%) are partial interest-only, all of which have
begun amortizing.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade to classes A-3 and A-AB is considered unlikely;
class A-AB is in first pay position. Class A-AB benefits from
the deal structure which applies amortization to this class on
a paydown schedule. Both classes are expected to be paid in
full by performing loans at maturity. The Negative Outlooks
reflect the possibility that these classes could be downgraded
if overall pool performance were to deteriorate significantly,
if outsized losses occur, or if the classes were to be
impacted by interest shortfalls.
-- Further downgrades to classes A-4 and X-A may occur if the
probability of an outsized loss on Westfield Countryside
and/or the Mall at Tuttle Crossing becomes more likely. Class
A-S would be downgraded if loss expectations increase or if
Southdale Center were to transfer to special servicing.
Further downgrades to classes B, C, PST, D, E and F would
occur as losses are realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade of classes A-4, X-A and A-S would only occur with
significant improvement in CE and/or defeasance but would be
limited while Westfield Countryside and the Mall at Tuttle
Crossing remain in special servicing. Classes would not be
upgraded above 'Asf' if there is a likelihood for interest
shortfalls.
-- An upgrade to classes B, C, PST, D, E and F is considered to
be unlikely unless the specially serviced loans liquidate with
recoveries well above expectations. While three loans in the
top four remain in special servicing, upgrades are extremely
unlikely.
Deutsche Bank is the trustee for the transaction, and serves as the
backup advancing agent. Fitch's Issuer Default Rating for Deutsche
Bank is currently 'BBB'/'F2'/Outlook Positive. Fitch relies on the
master servicer, Wells Fargo Bank, N.A., a division of Wells Fargo
& Company (A+/F1/ Negative), which is currently the primary
advancing agent, as counterparty. Fitch provided ratings
confirmation on Jan. 24, 2018.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
MSBAM 2013-C11 has an ESG Relevance Score of '4' for Exposure to
Social Impacts due to the exposure to the sustained structural
shift in secular preferences affecting consumer trends, occupancy
trends, etc. which, in combination with other factors, affect the
ratings.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
MORGAN STANLEY 2017-C34: Fitch Lowers 2 Certs to 'CCC'
------------------------------------------------------
Fitch Ratings has downgraded four and affirmed 12 classes of Morgan
Stanley Bank of America Merrill Lynch Trust 2017-C34 commercial
mortgage passthrough certificates (MSBAM 2017-C34). Fitch has also
removed four classes from Rating Watch Negative and assigned
Negative Outlooks to two classes.
DEBT RATING PRIOR
---- ------ -----
MSBAM 2017-C34
Class A-1 61767EAA2 LT AAAsf Affirmed AAAsf
Class A-2 61767EAB0 LT AAAsf Affirmed AAAsf
Class A-3 61767EAD6 LT AAAsf Affirmed AAAsf
Class A-4 61767EAE4 LT AAAsf Affirmed AAAsf
Class A-S 61767EAH7 LT AAAsf Affirmed AAAsf
Class A-SB 61767EAC8 LT AAAsf Affirmed AAAsf
Class B 61767EAJ3 LT AA-sf Affirmed AA-sf
Class C 61767EAK0 LT A-sf Affirmed A-sf
Class D 61767EAU8 LT BBB-sf Affirmed BBB-sf
Class E 61767EAW4 LT B-sf Downgrade BB-sf
Class F 61767EAY0 LT CCCsf Downgrade B-sf
Class X-A 61767EAF1 LT AAAsf Affirmed AAAsf
Class X-B 61767EAG9 LT A-sf Affirmed A-sf
Class X-D 61767EAL8 LT BBB-sf Affirmed BBB-sf
Class X-E 61767EAN4 LT B-sf Downgrade BB-sf
Class X-F 61767EAQ7 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades and Negative Watch
removals reflect increased loss expectations for the pool since
Fitch's prior rating action, driven primarily by the OKC Outlets
and Mall of Louisiana loans, and continued performance declines on
a greater number of Fitch Loans of Concern (FLOCs) affected by the
pandemic. There are 11 FLOCs (32.7% of pool), up from six (16.5%)
at the prior rating action. Fitch's current ratings incorporate a
base case loss of 5.80%. The Negative Rating Outlooks reflect
losses that could reach 6.10% when factoring additional
coronavirus-related stresses.
The largest increase in loss since the prior rating action and
largest contributor to overall loss expectations, the OKC Outlets
loan (4.8%), which is secured by a 394,340-sf outlet center in
Oklahoma City, OK, was flagged for declining occupancy, significant
near-term lease rollover and performance impact from the pandemic.
There is also upcoming refinance concerns, as the loan matures in
May 2022. Fitch's base case loss of 24% reflects a 15% cap rate and
20% haircut to the YE 2019 NOI.
Property-level YE 2020 NOI declined 31% from YE 2019 due to lower
occupancy. Occupancy fell to 83.9% in March 2021 from 86.5% at YE
2020 and 92.6% at YE 2019. Several tenants vacated at or prior to
expiration, including Brooks Brothers (1.9% of NRA), Spirit
Halloween (1.9%), Lane Bryant Outlet (1.5%) and Talbots (1.0%).
Major tenants include Nike (3.5%; lease expiry in January 2022),
Forever 21 (3.1%; January 2025) and Old Navy (2.8%; November 2023).
Upcoming rollover includes 19.3% of NRA in 2021, 24.2% in 2022 and
17.0% in 2023.
The borrower was granted coronavirus debt relief, which suspended
the monthly replenishment of replacement and rollover reserves from
June through August 2020, and allowed the use of existing reserves
to fund debt service for June and July 2020. The borrower began a
12-month replenishment of the reserves in January 2021. Comparable
inline tenant sales were $462 psf as of TTM June 2021, up from $397
psf as of TTM June 2020 and $439 psf as of TTM August 2019.
The next largest contributor to losses is the Mall of Louisiana
loan (4.2%), secured by a 777,000-sf portion of a 1.6 million-sf
super-regional mall in Baton Rouge, LA. Collateral occupancy has
fluctuated between 89% and 93% since issuance. As of June 2021,
total collateral occupancy was 89.9%, compared with 89.0% at YE
2020 and 92.6% at YE 2019.
Non-collateral anchors include Dillard's, Dillard's Men's & Home,
JCPenney, Macy's and a vacant former Sears that closed during
spring of 2021. Collateral tenants include AMC Theaters (9.6% of
collateral NRA leased through July 2026), Dick's Sporting Goods
(9.5%; January 2024), Main Event Entertainment (6.4%; August 2024)
and Nordstrom Rack (3.9%; September 2025). Upcoming rollover
includes 26.5% of collateral NRA in 2021, 20.7% in 2022 and 11.1%
in 2023.
Comparable inline sales for tenants less than 10,000 sf were $335
psf (excluding Apple) at YE 2020, compared to $454 psf at YE 2019
and $461 psf at YE 2018. Fitch's base case loss of 22% reflects a
15% cap rate and 10% haircut to the YE 2020 NOI to reflect the
upcoming rollover, dark Sears box, declining sales, regional mall
asset class and tertiary market location.
Minimal Change to Credit Enhancement: As of the August 2021
distribution date, the pool's aggregate principal balance has paid
down by 2.5% to $1.02 billion from $1.05 billion at issuance.
Thirteen loans (43.6% of pool) is full-term interest-only and nine
loans (24.9%) still have a partial interest-only component during
their remaining loan term, compared with 33.2% of the pool at
issuance. One loan (OKC Outlets; 4.8%) is scheduled to mature in
May 2022, one (0.3%) in May 2024 and the remaining 47 loans (94.9%)
mature between June and October 2027.
Coronavirus Exposure: Loans secured by retail, hotel, and
multifamily properties represent 26.5% of the pool (15 loans), 9.5%
(five loans) and 6.7% (five loans), respectively. Fitch's
sensitivity analysis applied an additional pandemic-related stress
on one retail loan (2%) and five hotel loans (9.5%) to account for
potential cash flow disruptions due to the pandemic; these
additional stresses contributed to the Negative Outlooks.
Credit Opinion Loan: One loan (237 Park Avenue; 6.9% of pool)
received a standalone investment-grade credit opinion of 'BBB+sf*'
at issuance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool-level losses
from underperforming or specially serviced loans. Downgrades
to classes A-1, A-2, A-3, A-4, A-SB, A-S and X-A are not
likely due to the position in the capital structure, but may
occur should interest shortfalls affect these classes.
Downgrades to classes B, C and X-B may occur should expected
pool losses increase significantly and/or the FLOCs and/or
loans susceptible to the pandemic suffer losses.
-- Downgrades to classes D, E, X-D and X-E are possible should
loss expectations increase from continued performance decline
on FLOCs, loans susceptible to the pandemic not stabilize and
deteriorate further, additional loans (particularly OKC
Outlets and Mall of Louisiana) default or transfer to special
servicing and/or higher realized losses than expected on the
specially serviced loans. Downgrades to classes F and X-F
would occur as losses are realized and/or become more certain.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with stable to improved asset
performance, particularly on the FLOCs, coupled with
additional paydown and/or defeasance. Upgrades to classes B, C
and X-B would only occur with significant improvement in CE,
defeasance, and/or performance stabilization of FLOCs and
other properties affected by the pandemic. Classes would not
be upgraded above 'Asf' if there were likelihood of interest
shortfalls.
-- Upgrades to classes D, E, X-D and X-E may occur as the number
of FLOCs are reduced, properties vulnerable to the pandemic
return to pre-pandemic levels, the OKC Outlets loan is
successfully refinanced at maturity and there is sufficient CE
to the classes. Upgrades to classes F and X-F are not likely
until the later years of the transaction and only if the
performance of the remaining pool is stable and/or properties
vulnerable to the pandemic return to pre-pandemic levels, and
there is sufficient CE to the classes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
MORGAN STANLEY 2018-L1: Fitch Affirms B- Rating on H-RR Debt
------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of Morgan Stanley Capital I
Trust 2018-L1. Fitch has also revised the Rating Outlooks for
classes F-RR and G-RR to Stable from Negative. The Outlooks on
class H-RR remains Negative.
DEBT RATING PRIOR
---- ------ -----
MSC 2018-L1
A-1 61691QAA6 LT AAAsf Affirmed AAAsf
A-2 61691QAB4 LT AAAsf Affirmed AAAsf
A-3 61691QAD0 LT AAAsf Affirmed AAAsf
A-4 61691QAE8 LT AAAsf Affirmed AAAsf
A-S 61691QAH1 LT AAAsf Affirmed AAAsf
A-SB 61691QAC2 LT AAAsf Affirmed AAAsf
B 61691QAJ7 LT AA-sf Affirmed AA-sf
C 61691QAK4 LT A-sf Affirmed A-sf
D 61691QAN8 LT BBBsf Affirmed BBBsf
E 61691QAQ1 LT BBB-sf Affirmed BBB-sf
F-RR 61691QAS7 LT BB+sf Affirmed BB+sf
G-RR 61691QAU2 LT BB-sf Affirmed BB-sf
H-RR 61691QAW8 LT B-sf Affirmed B-sf
X-A 61691QAF5 LT AAAsf Affirmed AAAsf
X-B 61691QAG3 LT AA-sf Affirmed AA-sf
X-D 61691QAL2 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Improved Loss Expectations: Fitch's base case loss has decreased
since the last rating action primarily due to a better than
expected performance of the underlying collateral. Fitch's ratings
incorporate a base case loss of 2.9% and a sensitivity that
reflects losses that could reach 4.0% when factoring additional
stresses to three hotel loans and one retail loan. There are five
loans that have been designated as Fitch Loans of Concern (FLOCs)
(12.0%), including one other loan (4.9%) in special servicing; four
loans (7.1%) have been flagged for upcoming lease expirations
and/or pandemic-related underperformance.
The Stable Outlooks reflect the stable performance of the majority
of the pool. The Negative Outlook on class H-RR reflects the
concern over FLOCs (12.0%), including one loan (4.9%) in special
servicing. The Outlook revision on classes F-RR and G-RR to Stable
from Negative reflects the better than expected performance from
loans amid the coronavirus pandemic.
The largest contributor to loss expectations is Navika Six
Portfolio (4.9%, FLOC), which is secured by a portfolio of six
hotel properties located in CA, TX, FL & NJ. This loan transferred
to special servicing in March 2021 for payment default due to
economic hardship as a result of the coronavirus pandemic. The
lender has engaged legal counsel ,and a proposal for a
modification/forbearance agreement is under review. As of the
August 2021 payment date, the loan was classified as 90+ Days
delinquent. Fitch's base case loss of 4% reflects a 12.5% cap rate
on the YE 2019 NOI. Fitch considered an additional scenario where
losses could reach 16%. This expected loss reflects a 26% haircut
on YE 2019 NOI and a cap rate of 11%.
The second largest contributor to loss expectations is Embassy
Suites Atlanta Airport (4.7%, FLOC), a limited service hotel
located in Atlanta, GA. This loan is on the servicer's watchlist
for coronavirus pandemic related underperformance. Subject YE 2020
NOI DSCR was 0.27x compared to 1.91x at YE 2019 and underwritten
NOI DSCR of 1.94x. Per the subject's June 2021 STR report, subject
TTM June 2021 RevPar was $52.15 compared to TTM June 2019 RevPar of
$122.74. Fitch performed an additional sensitivity that applied a
potential outsized loss of approximately 13%, which is based on YE
2019 NOI with a 26% haircut with a cap rate of 11%.
Coronavirus Exposure: Five loans (13.3%) are secured by lodging
properties, four of which are flagged as FLOCs. Twenty-one loans
(37.6%) are secured by retail properties, one of which is flagged
as a FLOC. The hotel properties within the pool experienced
significant performance challenges in 2020 due to reduced revenues
and/or temporary property closures related to the pandemic. Fitch
ran an additional sensitivity scenario with a 26% stress to YE 2019
NOI for three hotels and a 20% stress to YE 2019 NOI for one retail
loan to test the durability of the cash flows. The Negative Outlook
on class H-RR are partially attributable to this sensitivity.
Minimal Change in Credit Enhancement: As of the August 2021
distribution date, the pool's aggregate balance has been reduced by
0.9% to $892.2 million from $900.6 million at issuance. One loan
(0.8%) have been defeased. No loans are scheduled to mature until
2023. Twenty-two loans (55.0%) are classified as interest only.
ADDITIONAL CONSIDERATIONS
Investment-Grade Credit Opinion Loans: At issuance, Fitch gave
Aventura Mall (6.7%), Partners Portfolio (6.2%) and The Gateway
(4.5%) investment-grade credit opinions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The Negative Outlook on class H-RR reflect the potential for
downgrades due to concerns surrounding the ultimate impact of
the coronavirus pandemic and the performance concerns
associated with the FLOCs.
-- Downgrades could be triggered by an increase in pool-level
losses from underperforming or specially serviced loans.
Downgrades to the classes rated 'AAAsf' are not considered
likely due to position in the capital structure, but may occur
at 'AAAsf' or 'AA-sf' should interest shortfalls occur.
Downgrades to classes C through E may occur if overall pool
performance declines or loss expectations increase. Downgrades
to classes F-RR and G-RR may occur. Downgrades to class H-RR
may occur if the loan in special servicing remain unresolved,
or if additional loans default or transfer to the special
servicer.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades could be triggered by significantly improved
performance coupled with paydown and/or defeasance. An upgrade
to classes B and C could occur with stabilization of the
FLOCs, but would be limited as concentrations increase.
Classes would not be upgraded above 'Asf' if there is
likelihood of interest shortfalls.
-- Upgrades of classes D and E would only occur with significant
improvement in credit enhancement and stabilization of the
FLOCs. An upgrade to classes F-RR, G-RR and H-RR is not likely
unless performance of the FLOCs improves, and if performance
of the remaining pool is stable.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
NEUBERGER BERMAN 44: S&P Assigns Prelim BB- (sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Neuberger
Berman Loan Advisers CLO 44 Ltd./Neuberger Berman Loan Advisers CLO
44 LLC's floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of Sept. 10,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Neuberger Berman Loan Advisers CLO 44 Ltd./
Neuberger Berman Loan Advisers CLO 44 LLC
Class A, $378 million: AAA (sf)
Class B, $78 million: AA (sf)
Class C (deferrable), $36 million: A (sf)
Class D (deferrable), $36 million: BBB- (sf)
Class E (deferrable), $24 million: BB- (sf)
Subordinated notes, $59 million: Not rated
NEW RESIDENTIAL 2021-NQM3: Fitch Gives 'B(EXP)' Rating to B-2 Debt
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to New Residential
Mortgage Loan Trust 2021-NQM3 (NRMLT 2021-NQM3).
DEBT RATING
---- ------
NRMLT 2021-NQM3
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
XS-1 LT NR(EXP)sf Expected Rating
XS-2 LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch Ratings expects to rate the residential mortgage-backed notes
to be issued by NRMLT 2021-NQM3 as indicated above. The notes are
supported by a mix of 483 seasoned and newly originated loans that
had a balance of $262.2 million as of the Sept. 1, 2021 cutoff
date. The pool consists of loans primarily originated by NewRez LLC
(NewRez), which was formerly known as New Penn Financial, LLC. The
seasoned loans in this pool are from the recently collapsed NRMLT
2019-3-NQM3.
The notes are secured mainly by non-qualified mortgage (non-QM)
loans as defined by the Ability-to-Repay (ATR) Rule. Of the loans
in the pool, 85.3% are designated as non-QM while the remainder are
not subject to the ATR Rule.
There is Libor exposure in this transaction. The collateral
consists of 21.9% adjustable-rate loans, which reference one-year
Libor. The notes are fixed rate and capped at the net weighted
average coupon.
KEY RATING DRIVERS
Non-Prime Credit Quality (Mixed): The collateral consists of 483
loans, totaling $262 million and seasoned approximately 18 months
in aggregate, according to Fitch (as calculated from origination
date). The borrowers have a moderate credit profile similar to
other non-QM transactions from the issuer (736 FICO and 36% debt to
income ratios as determined by Fitch) and moderate leverage (77.8%
sLTV). The pool consists of 71.7% of loans where the borrower
maintains a primary residence, while 28.3% is considered an
investor property or second home. Additionally, only 14% of the
loans were originated through a retail channel. Moreover, 85% are
considered non-QM and the remainder are not subject to QM. NewRez
LLC originated 83.5% of the loans, which have been serviced since
origination by Shellpoint Mortgage Servicing. The remaining 16.5%
of the loans were originated by various entities.
Geographic Concentration (Negative): Approximately 41% of the pool
is concentrated in California. The largest MSA concentration is in
the Los Angeles area (24.4%), followed by the New York City area
MSA (22.0%) and the Miami-Fort Lauderdale MSA (7.8%). The top three
MSAs account for 54% of the pool. As a result, there was a 1.10x
payment default (PD) penalty for geographic concentration.
Loan Documentation (Negative): Approximately 83.4% of the pool was
underwritten to less than full documentation, according to Fitch.
Approximately 68% was underwritten to a 12- or 24-month bank
statement program for verifying income, which is not consistent
with Fitch's view of a full documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Financial Protection Bureau's ATR Rule,
which reduces the risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to rigor of the ATR Rule's mandates with respect to the
underwriting and documentation of the borrower's ATR. Additionally,
0.05% are Asset Depletion product (1 loan) and 14.7% are a debt
service coverage ratio product.
Fitch considered 16.6% of the pool as fully documented based on the
loans being underwritten to 12-24 months of W2s and/or tax
returns.
High Investor Property Concentrations (Negative): Approximately 25%
of the pool comprises investment property loans, including 14.7%
underwritten to a cash flow ratio rather than the borrower's
debt-to-income ratio. Investor property loans exhibit higher PDs
and higher loss severities than owner-occupied homes. Fitch
increased the PD by approximately 2.0x for the cash flow ratio
loans (relative to a traditional income documentation investor
loan) to account for the increased risk.
Modified Sequential Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A notes
while shutting out the subordinate bonds from principal until all
three classes are reduced to zero. To the extent that either the
cumulative loss trigger event or the delinquency trigger event
occurs in a given period, principal will be distributed
sequentially to the class A-1, A-2 and A-3 bonds until they are
reduced to zero.
Macro or Sector Risks (Positive): Consistent with the "Additional
Scenario Analysis" section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario or
if actual performance data indicates the current assumptions
require reconsideration. In response to revisions made to Fitch's
macroeconomic baseline scenario, observed actual performance data,
and the unexpected development in the health crisis arising from
the advancement and availability of coronavirus vaccines, Fitch
reconsidered the application of the Coronavirus-related Economic
Risk Factor (ERF) floors of 2.0 and used ERF Floors of 1.5 and 1.0
for the 'BBsf' and 'Bsf' rating stresses, respectively.
Fitch's "March 2021 Global Economic Outlook" and related base-line
economic scenario forecasts have been revised to a 6.2% U.S. GDP
growth for 2021 and 3.3% for 2022 following a -3.5% GDP growth in
2020. Additionally, Fitch's U.S. unemployment forecasts for 2021
and 2022 are 5.8% and 4.7%, respectively, which is down from 8.1%
in 2020. These revised forecasts support Fitch reverting back to
the 1.5 and 1.0 ERF floors described in Fitch's "U.S. RMBS Loan
Loss Model Criteria."
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model projected 41% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by situsAMC and Infinity IPS. The third-party due
diligence described in Form 15E focused on a full review of the
loans as it relates to credit, compliance and property valuation.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustment to its analysis: a 5% credit
was applied to each loan's probability of default assumption. This
adjustment resulted in a 47bps reduction to the 'AAAsf' expected
loss.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
NOMURA HOME 2006-WF1: Moody's Hikes Rating on Cl. M-3 Bonds to Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of two bonds
from Nomura Home Equity Loan Trust 2006-WF1 transaction, backed by
subprime loans.
Complete rating actions are as follows:
Issuer: Nomura Home Equity Loan Trust 2006-WF1
Cl. M-2, Upgraded to Aa2 (sf); previously on Dec 31, 2019 Upgraded
to A2 (sf)
Cl. M-3, Upgraded to Ba1 (sf); previously on Dec 31, 2019 Upgraded
to Ba3 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increase in credit enhancement (CE)
available to the bonds and also the recent performance as well as
Moody's updated loss expectations on the underlying pool. The CE of
Class M-2 and Class M-3 has increased by around 11% and 7%,
respectively, over the last 12 months.
In light of the current macroeconomic environment, Moody's revised
loss expectations based on the extent of performance deterioration
of the underlying mortgage loans, resulting from a slowdown in
economic activity and increased unemployment due to the coronavirus
outbreak. Specifically, Moody's have observed an increase in
delinquencies, payment forbearance, and payment deferrals since the
start of pandemic, which could result in higher realized losses.
Moody's analysis considers the current proportion of loans granted
payment relief in each individual transaction. Moody's identified
these loans based on a review of loan level cashflows over the last
few months. In cases where loan level data is not available,
Moody's assumed that the proportion of borrowers enrolled in
payment relief programs would be equal to levels observed in
transactions of comparable asset quality. Based on Moody's
analysis, the proportion of borrowers that are currently enrolled
in payment relief plans varied greatly, ranging between
approximately 3.8% and 13.9% among RMBS transactions issued before
2009. In Moody's analysis, Moody's assume these loans to experience
lifetime default rates that are 50% higher than default rates on
the performing loans.
In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Moody's analysis
considered the impact of six months of scheduled principal payments
on the loans enrolled in payment relief programs being passed to
the trust as a loss. The magnitude of this loss will depend on the
proportion of the borrowers in the pool subject to principal
deferral and the number of months of such deferral.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
OCP CLO 2017-13: S&P Assigns BB- (sf) Rating on Class D-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-1a-R, A-1b-R, A-2-R, B-R, C-R, and D-R notes from OCP CLO 2017-13
Ltd./OCP CLO 2017-13 LLC, a CLO originally issued in 2013 that is
managed by Onex Credit Partners LLC. At the same time, S&P withdrew
their ratings on the original class A-1a, A-1b, A-2a, A-2b, B, C,
and D notes following payment in full on the Sept. 14, 2021,
refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- All replacement classes except for the class A-1b-R notes were
issued at lower spreads than the original classes, which reduced
the transaction's overall cost of funding.
-- The balance of the replacement class A-1a-R notes was increased
by $16 million, while the balance of the replacement class A-1b-R
notes, which S&P did not originally rate, was reduced by the same
amount.
-- The original pro rata, floating-rate class A-2a notes and
fixed-rate class A-2b notes were merged into the replacement
floating-rate class A-2-R notes.
-- The non-call period was extended by approximately 2.5 years.
On a standalone basis, the results of the cash flow analysis
indicated a lower rating on the class D-R notes than the rating
action reflects. However, S&P assigned its 'BB- (sf)' rating to
these notes for multiple reasons:
-- While exposure to assets rated in the 'CCC' category has
increased since S&P last reviewed the transaction, the exposure is
still below the threshold that would necessitate haircuts to the
overcollateralization ratio, and the portfolio remains unexposed to
defaulted assets.
-- The reduced tranche spreads lowered the transaction's overall
cost of funding and improved this tranche's cash flow results
significantly.
Replacement And Original Note Issuances
Replacement notes
Class A-1a-R, $382.00 million: Three-month LIBOR + 0.96%
Class A-1b-R, $20.00 million: Three-month LIBOR + 1.40%
Class A-2-R, $51.00 million: Three-month LIBOR + 1.55%
Class B-R, $42.00 million: Three-month LIBOR + 2.00%
Class C-R, $33.00 million: Three-month LIBOR + 3.10%
Class D-R, $24.00 million: Three-month LIBOR + 6.50%
Original notes
Class A-1a, $366.00 million: Three-month LIBOR + 1.26%
Class A-1b, $36.00 million: Three-month LIBOR + 1.34%
Class A-2a, $38.50 million: Three-month LIBOR + 1.80%
Class A-2b, $12.50 million: 3.7982%
Class B, $42.00 million: Three-month LIBOR + 2.55%
Class C, $33.00 million: Three-month LIBOR + 3.71%
Class D, $24.00 million: Three-month LIBOR + 6.63%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
OCP CLO 2017-13 Ltd./OCP CLO 2017-13 LLC
Class A-1a-R, $382.00 million: AAA (sf)
Class A-1b-R, $20.00 million: AA+ (sf)
Class A-2-R, $51.00 million: AA (sf)
Class B-R, $42.00 million: A (sf)
Class C-R, $33.00 million: BBB- (sf)
Class D-R, $24.00 million: BB- (sf)
Subordinated notes, $57.90 million: NR
Ratings Withdrawn
OCP CLO 2017-13 Ltd./OCP CLO 2017-13 LLC
Class A-1a: to NR from 'AAA (sf)'
Class A-2a: to NR from 'AA (sf)'
Class A-2b: to NR from 'AA (sf)'
Class B: to NR from 'A (sf)'
Class C: to NR from 'BBB- (sf)'
Class D: to NR from 'BB- (sf)'
NR--Not rated.
POST CLO 2021-1: S&P Assigns BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to Post CLO 2021-1
Ltd./Post CLO 2021-1 LLC's floating-rate notes.
The note issuance is a CLO securitization backed primarily by
broadly syndicated speculative-grade senior secured term loans that
are governed by collateral quality tests. The transaction is
managed by Post Advisory Group LLC.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Post CLO 2021-1 Ltd./Post CLO 2021-1 LLC
Class A, $252.00 million: AAA (sf)
Class B, $52.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $23.00 million: BBB- (sf)
Class E (deferrable), $13.00 million: BB- (sf)
Subordinated notes, $43.40 million: Not rated
RR 18: S&P Assigns BB- (sf) Rating on $30MM Class D Notes
---------------------------------------------------------
S&P Global Ratings assigned its ratings to RR 18 Ltd.'s
floating-rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
RR 18 Ltd.
Class A-1a, $450.00 million: AAA (sf)
Class A-1b, $18.75 million: AAA (sf)
Class A-2, $93.75 million: AA (sf)
Class B, $52.50 million: A (sf)
Class C, $45.00 million: BBB- (sf)
Class D, $30.00 million: BB- (sf)
Subordinated notes, $65.80 million: Not rated
SARANAC CLO VI: Moody's Hikes Rating on $17MM Class E Notes to B1
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
CLO refinancing notes issued by Saranac CLO VI Limited (the
"Issuer").
Moody's rating action is as follows:
US$210,000,000 Class A-1R Senior Secured Floating Rate Notes due
2031 ("the Class A-1R Notes"), Assigned Aaa (sf)
US$16,564,524 Class A-2FR Senior Secured Fixed Rate Notes due 2031
("the Class A-2R Notes"), Assigned Aaa (sf)
US$14,000,000 Class C-1R Secured Deferrable Floating Rate Notes due
2031 ("the Class C-1R Notes"), Assigned A3 (sf)
US$7,000,000 Class C-FR Secured Deferrable Fixed Rate Notes due
2031 ("the Class C-FR Notes"), Assigned A3 (sf)
Additionally, Moody's has taken rating action on the following
outstanding notes originally issued by the Issuer on August 13,
2018 (the "Original Closing Date"):
US$17,000,000 Class E Secured Deferrable Floating Rate Notes due
2031 ("the Class E Notes"), Upgraded to B1 (sf); previously on July
30, 2020 Downgraded to B2 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Saranac CLO Management, LLC (the "Manager") will continue to direct
the selection, acquisition and disposition of the assets on behalf
of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's remaining
reinvestment period.
The Issuer previously issued two other classes of secured notes and
one class of subordinated notes, which will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of non-call period; the
inclusion of alternative benchmark replacement provisions; and
changes to the definition of "Moody's Adjusted Weighted Average
Rating Factor".
Moody's rating action on the Class E Notes is primarily a result of
the refinancing, which increases excess spread available as credit
enhancement to the rated notes.
The upgrade action is also a result of an increase in the
transaction's over-collateralization (OC) ratios since July 2020.
Based on the trustee's August 2021 report[1], the OC ratio for the
Class E notes is reported at 107.11%, versus the July 2020[2] level
of 103.25%. Notwithstanding the foregoing, Moody's notes that the
recently reported weighted average rating factor continues to fail
the test level.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $343,651,485
Diversity Score: 78
Weighted Average Rating Factor (WARF): 3189
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
3.69%
Weighted Average Recovery Rate (WARR): 49.18%
Weighted Average Life (WAL): 5.28 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
SEQUOIA MORTGAGE 2021-6: Fitch Gives 'BB-(EXP)' Rating to B4 Certs
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by Sequoia Mortgage Trust 2021-6 (SEMT
2021-6).
DEBT RATING
---- ------
SEMT 2021-6
A1 LT AAA(EXP)sf Expected Rating
A2 LT AAA(EXP)sf Expected Rating
A3 LT AAA(EXP)sf Expected Rating
A4 LT AAA(EXP)sf Expected Rating
A5 LT AAA(EXP)sf Expected Rating
A6 LT AAA(EXP)sf Expected Rating
A7 LT AAA(EXP)sf Expected Rating
A8 LT AAA(EXP)sf Expected Rating
A9 LT AAA(EXP)sf Expected Rating
A10 LT AAA(EXP)sf Expected Rating
A11 LT AAA(EXP)sf Expected Rating
A12 LT AAA(EXP)sf Expected Rating
A13 LT AAA(EXP)sf Expected Rating
A14 LT AAA(EXP)sf Expected Rating
A15 LT AAA(EXP)sf Expected Rating
A16 LT AAA(EXP)sf Expected Rating
A17 LT AAA(EXP)sf Expected Rating
A18 LT AAA(EXP)sf Expected Rating
A19 LT AAA(EXP)sf Expected Rating
A20 LT AAA(EXP)sf Expected Rating
A21 LT AAA(EXP)sf Expected Rating
A22 LT AAA(EXP)sf Expected Rating
A23 LT AAA(EXP)sf Expected Rating
A24 LT AAA(EXP)sf Expected Rating
A25 LT AAA(EXP)sf Expected Rating
AIO1 LT AAA(EXP)sf Expected Rating
AIO2 LT AAA(EXP)sf Expected Rating
AIO3 LT AAA(EXP)sf Expected Rating
AIO4 LT AAA(EXP)sf Expected Rating
AIO5 LT AAA(EXP)sf Expected Rating
AIO6 LT AAA(EXP)sf Expected Rating
AIO7 LT AAA(EXP)sf Expected Rating
AIO8 LT AAA(EXP)sf Expected Rating
AIO9 LT AAA(EXP)sf Expected Rating
AIO10 LT AAA(EXP)sf Expected Rating
AIO11 LT AAA(EXP)sf Expected Rating
AIO12 LT AAA(EXP)sf Expected Rating
AIO13 LT AAA(EXP)sf Expected Rating
AIO14 LT AAA(EXP)sf Expected Rating
AIO15 LT AAA(EXP)sf Expected Rating
AIO16 LT AAA(EXP)sf Expected Rating
AIO17 LT AAA(EXP)sf Expected Rating
AIO18 LT AAA(EXP)sf Expected Rating
AIO19 LT AAA(EXP)sf Expected Rating
AIO20 LT AAA(EXP)sf Expected Rating
AIO21 LT AAA(EXP)sf Expected Rating
AIO22 LT AAA(EXP)sf Expected Rating
AIO23 LT AAA(EXP)sf Expected Rating
AIO24 LT AAA(EXP)sf Expected Rating
AIO25 LT AAA(EXP)sf Expected Rating
AIO26 LT AAA(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
B1 LT AA-(EXP)sf Expected Rating
B2 LT A-(EXP)sf Expected Rating
B3 LT BBB-(EXP)sf Expected Rating
B4 LT BB-(EXP)sf Expected Rating
B5 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 497 loans with a total balance of
approximately $448.88 million, as of the cut-off date. The pool
consists of prime fixed-rate mortgages (FRMs) acquired by Redwood
Residential Acquisition Corp. from various mortgage originators.
Distributions of principal and interest (P&I) and loss allocations
are based on a senior-subordinate, shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
497 full documentation loans, totaling $448.88 million and seasoned
approximately one month in aggregate (difference between
origination date and cut-off date). The borrowers have a strong
credit profile (773 model FICO, 32.3% debt to income ratio DTI))
and moderate leverage (75.5% sustainable loan to value ratio
(sLTV)). Of the pool, 94.5% consist of loans for primary
residences, while 5.5% are for second homes. Additionally, 91.0% of
the loans were originated through a retail channel, and 100% are
designated as a qualified mortgage (QM) loan.
Shifting-Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent (a stop-advance loan). Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in high
stress scenarios.
120-Day Stop Advance (Mixed): The deal is structured to four months
of servicer advances for delinquent P&I. The limited advancing
reduces loss severities as a lower amount is repaid to the servicer
when a loan liquidates.
CE Floor (Positive): To mitigate tail risk, which arises as the
pool seasons and fewer loans are outstanding, a subordination floor
of 0.85% of the original balance will be maintained for the
certificates.
Updated Economic Risk Factor (Positive): Consistent with the
Additional Scenario Analysis section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario or
if actual performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of the coronavirus-related ERF floors of 2.0 and used
ERF floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf' rating stresses,
respectively.
Fitch's "Global Economic Outlook - March 2021" and related baseline
economic scenario forecasts have been revised to 6.2% U.S. GDP
growth for 2021 and 3.3% for 2022 following negative 3.5% GDP
growth in 2020. Additionally, Fitch's U.S. unemployment forecasts
for 2021 and 2022 are 5.8% and 4.7%, respectively, which is down
from 8.1% in 2020. These revised forecasts support Fitch reverting
to the 1.5 and 1.0 ERF floors described in Fitch's "U.S. RMBS Loan
Loss Model Criteria."
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. Sensitivity analysis was
conducted at the state and national level to assess the effect
of higher MVDs for the subject pool.
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 39.3% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch's incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. Sensitivity analysis was
conducted at the state and national level to assess the effect
of lower MVDs.
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton and EdgeMac. The third-party due diligence
described in Form 15E focused on credit, compliance and property
valuations. Fitch considered this information in its analysis and,
as a result, Fitch made the following adjustment(s) to its
analysis: a 5% reduction to the loan's probability of default. This
adjustment(s) resulted in a less than 13bps reduction to the
'AAAsf' expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 81% of the pool. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." Clayton and EdgeMac, were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
Sequoia Mortgage Trust 2021-6 has an ESG Relevance Score of '4' [+]
for Transaction Parties & Operational Risk due to the strong
counterparties and well controlled operational considerations.,
which has a positive impact on the credit profile, and is relevant
to the rating[s] in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
STARWOOD MORTGAGE 2021-4: Fitch Gives 'B-(EXP)' Rating to B-2 Debt
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Starwood Mortgage
Residential Trust 2021-4.
DEBT RATING
---- ------
STAR 2021-4
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B-(EXP)sf Expected Rating
B-3-RR LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
FB LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
to be issued by Starwood Mortgage Residential Trust 2021-4,
Mortgage-Backed Certificates, Series 2021-4 (STAR 2021-4) as
indicated above. The certificates are supported by 915 loans with a
balance of approximately $465.3 million as of the cutoff date. This
will be the third Fitch-rated STAR transaction in 2021.
The certificates are secured primarily by mortgage loans that were
originated by third-party originators, with Luxury Mortgage
Corporation, HomeBridge Financial Services, Inc., Impac Mortgage
Corp., and United Shore Financial Services, LLC sourcing 83.3% of
the pool while the remaining 16.7% of the pool were originated by
various third-party originators each contributing less than 10%. Of
the loans in the pool, 34.9% are designated as nonqualified
mortgage (non-QM), and 51.3% are investment properties not subject
to Ability to Repay Rule (ATR). 14.2% of loans are designated as QM
or higher priced QM in the pool.
There is LIBOR exposure in this transaction. The collateral
consists of 24.5% adjustable-rate loans, which reference one-year
LIBOR while the remaining adjustable-rate loans reference one-year
treasury, and one-month SOFR. The certificates are fixed rate and
capped at the net weighted average coupon.
Fitch determined that 96 loans are in a FEMA declared disaster area
for individual assistance. The Servicers confirmed that as of
9/8/2021 none of the homes in the impacted areas suffered damage.
As a result, there was no impact to the transaction.
KEY RATING DRIVERS
Nonprime Credit Quality (Mixed): The collateral consists mainly of
30-year, fixed-rate fully amortizing loans (59.3%), the remaining
40.7% are adjustable rate loans (mainly 5/1, 7/1 ARMs). The pool is
seasoned approximately 23 months in aggregate, as determined by
Fitch. The borrowers in this pool have a relatively strong credit
profiles with a 734 WA FICO score and an original CLTV of 68.3%
that translates to a Fitch calculated sLTV of 70.9%. Fitch
determined the DTI to be 46%. The Fitch DTI is higher than the DTI
in the transaction documents, due to Fitch assuming a 55% DTI for
asset depletion loans and converting debt service coverage ratio
(DSCR) to a DTI for the DSCR loans.
Of the pool, 46.6% consists of loans where the borrower maintains a
primary residence, while 53.4% comprises an investor property or
second home; 24.1% of the loans were originated through a retail
channel. Additionally, 34.9% are designated as Non-QM, 13.6% are
designated as QM, 0.6% are designated as high-priced QM, and 51.3%
are exempt from QM since they are investor loans.
The pool contains 95 loans over $1 million, with the largest $4.41
million. Self-employed non-DSCR borrowers make up 43.7% of the
pool, 4.6% are asset depletion loans, and 43.0% are investor cash
flow DSCR loans.
Approximately 51.3% of the pool comprises loans on investor
properties (8.5% underwritten to the borrowers' credit profile and
42.8% comprising investor cash flow loans). 0.7% of the loans have
subordinate financing, and there are no second lien loans. 122
loans in the pool had a deferred balance, which was treated by
Fitch as a junior lien and the CLTV for that loan was increased to
account for the amount still owed on the loan.
14 loans in the pool were underwritten to foreign nationals or
non-permanent residents. Fitch treated these loans as being
investor occupied, having no documentation for income and
employment, and having no liquid reserve. Fitch assumed a FICO of
650 for non-permanent residents without a credit score.
Although the credit quality of the borrowers is higher than prior
NQM transactions, the pool characteristics resemble non-prime
collateral, and therefore, the pool was analyzed using Fitch's
non-prime model.
Geographic Concentration (Negative): Approximately 48% of the pool
is concentrated in California. The largest MSA concentration is in
the Los Angeles-Long Beach-Santa Ana, CA MSA (27.4%), followed by
the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA (23.5%)
and the Miami-Fort Lauderdale-Miami Beach MSA (6.2%). The top three
MSAs account for 57.1% of the pool. As a result, there was a 1.29x
PD penalty for geographic concentration which increased the 'AAAsf'
loss by 1.13%.
Loan Documentation (Negative): Approximately 80.9% of the pool was
underwritten to less than full documentation. 29.9% was
underwritten to a 12 or 24 month bank statement program for
verifying income, which is not consistent with Appendix Q standards
and Fitch's view of a full documentation program. A key distinction
between this pool and legacy Alt-A loans is that these loans adhere
to underwriting and documentation standards required under the
CFPB's ATR Rule (Rule), which reduces the risk of borrower default
arising from lack of affordability, misrepresentation or other
operational quality risks due to rigor of the Rule's mandates with
respect to the underwriting and documentation of the borrower's
ATR. Additionally, 4.6% is an Asset Depletion product, 0% is a CPA
or PnL product, and 43.0% is DSCR product.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent principal and interest. The
limited advancing reduces loss severities as there is a lower
amount repaid to the servicer when a loan liquidates and
liquidation proceeds are prioritized to cover principal repayment
over accrued but unpaid interest. The downside to this is the
additional stress on the structure side as there is limited
liquidity in the event of large and extended delinquencies.
Modified Sequential Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A
certificates while shutting out the mezzanine and subordinate bonds
from principal until all three classes have been reduced to zero.
To the extent that either the cumulative loss trigger event or the
delinquency trigger event occurs in a given period, principal will
be distributed sequentially to the class A-1, A-2 and A-3 bonds
until they are reduced to zero.
Macro or Sector Risks (Positive): Consistent with the Additional
Scenario Analysis section of Fitch's "U.S. RMBS Coronavirus-Related
Analytical Assumptions" criteria, Fitch will consider applying
additional scenario analysis based on stressed assumptions as
described in the section to remain consistent with significant
revisions to Fitch's macroeconomic baseline scenario or if actual
performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of Covid-19 vaccines, Fitch reconsidered the
application of the coronavirus-related Economic Risk Factor (ERF)
floors of 2.0 and used ERF floors of 1.5 and 1.0 for the 'BBsf' and
'Bsf' rating stresses, respectively. Fitch's "Global Economic
Outlook - June 2021" and related base-line economic scenario
forecasts have been revised to 6.8% U.S. GDP growth for 2021 and
3.9% for 2022 following a 3.5% GDP decline in 2020. Additionally,
Fitch's U.S. unemployment forecasts for 2021 and 2022 are 5.6% and
4.5%, respectively, which is down from 8.1% in 2020. These revised
forecasts support Fitch reverting to the 1.5 and 1.0 ERF floors
described in Fitch's "U.S. RMBS Loan Loss Model Criteria."
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. Sensitivity analyses was
conducted at the state and national levels to assess the
effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 41.3% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper MVDs than assumed at the
MSA level. Sensitivity analyses was conducted at the state and
national levels to assess the effect of higher MVDs for the
subject pool as well as lower MVDs, illustrated by a gain in
home prices.
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Clayton, and Opus. The third-party due diligence
described in Form 15E focused on three areas: compliance review,
credit review, and valuation review. Fitch considered this
information in its analysis and, as a result, Fitch did not make
any adjustment(s) to its analysis due to the due diligence
findings. Based on the results of the 100% due diligence performed
on the pool, the overall expected loss was reduced by 0.31%
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria." The sponsor,
Starwood Non-Agency Lending, LLC, engaged SitusAMC, Clayton
Services LLC, and Opus Capital Markets Consultants, LLC to perform
the review. Loans reviewed under these engagements were given
compliance, credit and valuation grades and assigned initial grades
for each subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences, but Fitch did not give due diligence credit
to five loans due to the findings.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format. The ASF data tape
layout was established with input from various industry
participants, including rating agencies, issuers, originators,
investors and others, to produce an industry standard for the
pool-level data in support of the U.S. RMBS securitization market.
The data contained in the data tape layout were populated by the
due diligence company and no material discrepancies were noted.
ESG CONSIDERATIONS
STAR 2021-4 has an ESG Relevance Score of '4'[+] for Transaction
Parties & Operational Risk due to operational risk being well
controlled for in STAR 2021-4, strong transaction due diligence as
well as a 'RPS1-' Fitch-rated servicer, which resulted in a
reduction in expected losses and is relevant to the ratings in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SYMPHONY CLO XXVIII: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Symphony CLO XXVIII
Ltd./Symphony CLO XXVIII LLC's floating-rate debt.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Symphony Alternative Asset Management
LLC.
The ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Symphony CLO XXVIII Ltd./Symphony CLO XXVIII LLC
Class X, $1.00 million: AAA (sf)
Class A, $250.00 million: AAA (sf)
Class A loans, $50.00 million: AAA (sf)
Class B, $80.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $18.75 million: BB- (sf)
Subordinated notes, $48.42 million: Not rated
SYMPHONY CLO XXVIII: S&P Assigns Prelim BB- (sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Symphony CLO
XXVIII Ltd./Symphony CLO XXVIII LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Symphony Alternative Asset Management
LLC.
The preliminary ratings are based on information as of Sept. 9,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Symphony CLO XXVIII Ltd./Symphony CLO XXVIII LLC
Class X, $1.00 million: AAA (sf)
Class A, $250.00 million: AAA (sf)
Class A loans, $50.00 million: AAA (sf)
Class B, $80.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $18.75 million: BB- (sf)
Subordinated notes, $48.42 million: Not rated
TCP WHITNEY: S&P Assigns BB- (sf) Rating on $24MM Class E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-R, B-R, C-R, D-R, and E-R notes and class A-RL loans from TCP
Whitney CLO Ltd./TCP Whitney CLO LLC, a CLO originally issued in
August 2017 that is managed by BlackRock Capital Investment
Advisors LLC.
On the Sept. 14, 2021 refinancing date, the proceeds from the
replacement notes were used to redeem the original notes. As a
result, S&P withdrew its ratings on the original notes and assigned
ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class A-R, B-R, C-R, and D-R notes were issued
at a lower spread over three-month LIBOR than the original notes.
-- The replacement class E-R notes were issued at a higher spread
over three-month LIBOR than the original notes.
-- The transaction issued a loan class, A-RL. The A-RL loans are
convertible into class A-R notes, but the class A-R notes may not
be converted to A-RL loans. In addition, the conversion from loans
to notes may only occur once whereby the outstanding amount of the
A-RL loans will be reduced to zero with a commensurate increase in
the amount of class A-R notes.
-- The stated maturity, reinvestment period, and non-call period
were extended by four years.
-- The transaction amended its ability to purchase workout-related
assets, conformed to updated rating agency methodology, and amended
the required minimums on the overcollateralization tests.
-- The transaction upsized to a target par of $400 million from
$342 million.
-- Additional subordinated notes were issued in connection with
this refinancing, and the stated maturity date was amended to match
the stated maturity of the other notes.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
TCP Whitney CLO Ltd./TCP Whitney CLO LLC
Class A-R, $200.00 million: AAA (sf)
Class A-RL loans, $30.00 million: AAA (sf)
Class B-R, $42.00 million: AA (sf)
Class C-R (deferrable), $32.00 million: A (sf)
Class D-R (deferrable), $24.00 million: BBB- (sf)
Class E-R (deferrable), $24.00 million: BB- (sf)
Subordinated notes, $59.41 million: NR
Ratings Withdrawn
TCP Whitney CLO Ltd./TCP Whitney CLO LLC
Class A-1: to NR from 'AAA (sf)'
Class A-2: to NR from 'AA (sf)'
Class B: to NR from 'A- (sf)'
Class C: to NR from 'BBB (sf)'
Class D: to NR from 'B+ (sf)'
Combination notes: to NR from 'BBB-p (sf)'
NR—Not Rated
UBS COMMERCIAL 2017-C4: Fitch Affirms B- Rating on 2 Tranches
-------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of UBS Commercial Mortgage
Trust, commercial mortgage pass-through certificates, series
2017-C4 (UBS 2017-C4). In addition, Fitch has revised the Rating
Outlooks on classes D and XD to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
UBS 2017-C4
A1 90276RBA5 LT AAAsf Affirmed AAAsf
A2 90276RBB3 LT AAAsf Affirmed AAAsf
A3 90276RBD9 LT AAAsf Affirmed AAAsf
A4 90276RBE7 LT AAAsf Affirmed AAAsf
AS 90276RBH0 LT AAAsf Affirmed AAAsf
ASB 90276RBC1 LT AAAsf Affirmed AAAsf
B 90276RBJ6 LT AA-sf Affirmed AA-sf
C 90276RBK3 LT A-sf Affirmed A-sf
D 90276RAL2 LT BBB-sf Affirmed BBB-sf
E 90276RAN8 LT BB-sf Affirmed BB-sf
F 90276RAQ1 LT B-sf Affirmed B-sf
XA 90276RBF4 LT AAAsf Affirmed AAAsf
XB 90276RBG2 LT AA-sf Affirmed AA-sf
XD 90276RAA6 LT BBB-sf Affirmed BBB-sf
XE 90276RAC2 LT BB-sf Affirmed BB-sf
XF 90276RAE8 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Overall Stable Loss Expectations: Overall loss expectations have
remained relatively stable since the prior rating action. The
revised Outlook on classes D and XD to Stable from Negative reflect
several loans experiencing less severe coronavirus pandemic-related
declines than expected. Nineteen loans (42% of the pool), including
nine (20%) in special servicing, were identified as Fitch Loans of
Concern (FLOCs).
Fitch's ratings incorporate a base case loss of 5.1%. Fitch also
ran additional sensitivities that stressed two hotel loans and one
retail loan indicating losses could reach as high as 5.9%. This
sensitivity analysis contributed to the Negative Outlooks on
classes E, XE, F, and XF. In addition, the Negative Outlooks
reflect the high percentage of specially serviced loans.
Fairmount at Brewerytown (3.6% of the pool), the largest
contributor to loss expectations, is secured by a six-story
mid-rise loft style apartment building with a total of 161 units,
12,450-sf of ground floor retail space and garage parking for 110
vehicles. The loan transferred to special servicing in June 2020
due to payment default. The property was significantly impacted by
the COVID-19 pandemic with tenants not making rental payments,
along with incurring significant capex costs related to HVAC and
other repairs, which were creating cash flow issues pre-COVID.
After several delinquent payments in 2020, the loan has remained
current since January 2021. Per servicer updates, cash management
is in place and discussions regarding possible assumption and
modification are ongoing.
Per the June 2020 rent roll, the property is 92% leased. An updated
rent roll has been requested but not yet available from the
servicer. Performance has declined since issuance, with YE 2019 NOI
19% below the issuers underwritten NOI. The NOI debt service
coverage ratio (DSCR) was 1.37x as of YE 2019 and YE 2018, compared
to 1.68x at issuance. Fitch's base case loss of approximately 22%
is based off an 8.50% cap rate and a 5% haircut to the 2019 NOI.
Floor & Decor / Garden Fresh Market (1.6%), the second largest
contributor to loss expectations, is secured by a 98,921-sf single
tenant Garden Fresh Market (lease expiring June 2032) in Mundelein,
IL and a 74,900-sf Floor & Decor (lease expiring May 2032) in
Arlington Heights, IL. The loan transferred to special servicing
for non-monetary default in February 2018 after the borrower did
not comply with the cash management agreement. A default letter for
failure to provide required financial reporting was sent to
obligors in November 2018, followed by a foreclosure complaint and
motion for appointment of receiver filed in September 2019. Per
servicer updates, the borrower remains in default and litigation is
ongoing. Fitch's base case loss of 50% reflects a discount to a
recent servicer appraised value.
Courtyard St. Louis Downtown Convention Center (2.2%), the third
largest contributor to loss expectations, is secured by a 165-key
limited service hotel in St. Louis, MO. The loan transferred in May
2020 for Imminent Monetary Default at the borrowers request as a
result of the COVID-19 pandemic. Performance was significantly
impacted with negative NOI reported for YE 2020, and continuing
into 1Q21, compared to 1.77x for TTM March 2020. Occupancy has
slightly improved to 42% as of 1Q21, compared to a low of 25% by YE
2020, which is significantly below the pre-pandemic occupancy of
66% as of TTM March 2020.
The loan has been in payment default since August 2020. Per
servicer updates, a COVID-19-related forebearance request was
recently approved and the servicer is currently working towards
documentation of the agreement. The Fitch base case loss of
approximately 26% reflects a discount to the servicer provided
appraised value, with a stressed value of approximately $84,000 per
key.
Minimal Change in Credit Enhancement: There has been little change
in credit support since issuance due to limited amortization, no
loan payoffs and no defeasance. As of the August 2021 distribution,
the pool's aggregate balance has been paid down by 3.8% to $789.2
million from $820.0 million at issuance. Thirteen loans
representing 40% of the pool are interest-only for the full term.
An additional 17 loans representing 33% of the pool were structured
with partial interest-only terms. Of those loans, one (1.4% of the
pool) has not yet begun to amortize. The vast majority of loans are
scheduled to mature in 2027, though there are two (6.4% of the
pool) maturing in 2022 and one (0.5% of the pool) maturing in
2026.
Loans Impacted by the Pandemic: Fitch notes that the retail and
hotel industries have faced significant challenges in the last year
due to social and market disruption stemming from the pandemic.
Retail is the second largest property type concentration,
representing 24% of the pool. One loan (1.6%) backed by a retail
property is in special servicing. For the 15 non-specially serviced
retail loans (22.3%), Fitch's loss expectations are based on YE
2020 or TTM 2021 performance for all but one of the loans.
Loans backed by hotels represent 19.9% of the pool. Five hotel
loans (12.1%) are in special servicing. Of the five non-specially
serviced hotel loans (7.7% of the pool), Fitch used pre-pandemic
cash flows with additional haircuts to reflect performance stresses
over the past year for three loans (6.25%) and TTM 2021 cash flows
for two loans (1.5%).
Fitch also ran additional coronavirus specific sensitivities that
stressed two hotel loans ($28.5 million Hilton Garden Inn
Irvine/Orange County Airport and $13.5 million DoubleTree Berkeley
Marina) and one retail loan ($11.4 million Sarasota Retail
Portfolio). This sensitivity analysis contributed to the Negative
Outlooks on classes E, XE, F, and XF.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades could be triggered by an increase in pool-level
losses from underperforming or specially serviced loans.
Downgrades to the classes rated 'AAAsf' are not considered
likely due to position in the capital structure, but may occur
at 'AAAsf' or 'AA-sf' should interest shortfalls occur.
Downgrades to classes C and D may occur if overall pool
performance declines or loss expectations increase.
-- Downgrades to classes E and X-E may occur if loans in special
servicing remain unresolved, or if performance of the FLOCs
fails to stabilize. Downgrades to classes F and X-F may occur
if additional loans default or transfer to the special
servicer.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades could be triggered by significantly improved
performance coupled with paydown and/or defeasance. An upgrade
to classes B and C could occur with stabilization of the
FLOCs, but would be limited as concentrations increase.
Classes would not be upgraded above 'Asf' if there is
likelihood of interest shortfalls.
-- Upgrades of classes D and E would only occur with significant
improvement in credit enhancement and stabilization of the
FLOCs. An upgrade to class F is not likely unless performance
of the FLOCs improves, and if performance of the remaining
pool is stable
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
UBS COMMERCIAL 2017-C5: Fitch Affirms B- Rating on G-RR Certs
-------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of UBS Commercial Mortgage
Trust 2017-C5 (UBSCM 2017-C5) commercial mortgage pass-through
certificates.
DEBT RATING PRIOR
---- ------ -----
UBS 2017-C5
A-1 90276TAA2 LT AAAsf Affirmed AAAsf
A-2 90276TAB0 LT AAAsf Affirmed AAAsf
A-3 90276TAE4 LT AAAsf Affirmed AAAsf
A-4 90276TAF1 LT AAAsf Affirmed AAAsf
A-5 90276TAG9 LT AAAsf Affirmed AAAsf
A-S 90276TAK0 LT AAAsf Affirmed AAAsf
A-SB 90276TAC8 LT AAAsf Affirmed AAAsf
B 90276TAL8 LT AA-sf Affirmed AA-sf
C 90276TAM6 LT A-sf Affirmed A-sf
D 90276TAN4 LT BBB+sf Affirmed BBB+sf
D-RR 90276TAQ7 LT BBBsf Affirmed BBBsf
E-RR 90276TAS3 LT BBB-sf Affirmed BBB-sf
F-RR 90276TAU8 LT BB-sf Affirmed BB-sf
G-RR 90276TAW4 LT B-sf Affirmed B-sf
X-A 90276TAH7 LT AAAsf Affirmed AAAsf
X-B 90276TAJ3 LT AA-sf Affirmed AA-sf
KEY RATING DRIVERS
Stable to Improved Performance: Fitch's loss expectations are
generally stable since the last rating action. Fitch's ratings
incorporate a base case loss of 4.0%. Fitch also ran additional
sensitivities that stressed six hotel loans indicating losses could
reach as high as 4.4%. There are 10 Fitch Loans of Concern (FLOC)
representing 23.5% of the pool, including three loans in special
servicing (4.6%).
Delshah NYC Portfolio (3.9%) is the largest FLOC. The collateral
includes two mixed-use properties located Manhattan's meatpacking
district, comprising ground floor retail space with multifamily
units above. The sole retail tenants at both locations vacated
their premises in 2020, prior to their lease expiration dates in
2026. The borrower has a pending lawsuit with Free People (51.3% of
portfolio NRA) to recover any delinquent and upcoming rent payments
through the end of the scheduled lease term.
Madewell, which formerly occupied 22.3% of portfolio NRA rejected
its lease during bankruptcy proceedings in 2020. A prospective
tenant is being vetted for the space previously occupied by
Madewell, according to the servicer. The YE 2020 NOI declined 11.1%
from YE 2019 NOI. Fitch modeled a base case loss of 22.5%.
The second largest FLOC and largest specially serviced loan is
Double-Tree Wilmington, a 244-room,full service hotel located in
Wilmington, DE. Performance declined significantly as a result of
reduced foot traffic due to the coronavirus pandemic. The June 2020
NOI debt service coverage ratio (DSCR) declined to 0.14x compared
with 1.66x at YE 2019. A loan modification was executed in June
2021, and the loan is now current and expected to return to the
master servicer. Fitch's analysis is based on a discount to a
recent valuation. Minimal losses are expected due to the
anticipation of eventual stabilization.
The third largest FLOC is the AHIP Northeast Portfolio III loan
(2.8%), which is secured by four full-service hotels located in
Maryland, New York, and New Jersey. The hotels within the portfolio
include the 127-room Hampton Inn Baltimore -- White Marsh, the
116-room Fairfield Inn and Suites Baltimore -- White Marsh, the
128-room SpringHill Suites -- Bellport, and the 120-room Homewood
Suites -- Egg Harbor.
The portfolio has been negatively impacted by the pandemic, and was
granted a consent agreement from the servicer in June 2020. The YE
2020 servicer reported NOI DSCR was 0.81x compared to YE 2019 at
2.21x. The YE 2020 NOI was down 63.4% yoy. Further, per the TTM
March 2021 STR reports for the properties, RevPAR declined between
30.9% and 53.1% yoy at the hotels. Fitch modeled a base case loss
of 10.8% and 15.2% as a sensitivity.
Loans Impacted by Pandemic: Nine loans (19.1% of the pool) are
secured by lodging properties, eight of which (18.1%) are flagged
as FLOCs. The hotels experienced significant performance challenges
in 2020 due to reduced reservations and/or temporary property
closures related to the pandemic. In addition to the base case, the
non-specially serviced loans were modeled with additional stresses
to the YE 2019 NOI ranging from 20% to 26%. The Negative Outlooks
on classes F-RR and G-RR are partially attributable to this
sensitivity.
Minimal Changes to Credit Enhancement: As of the August 2021
remittance, the pool's aggregate principal balance has been reduced
by 2.1% to $728 million from $743 million at issuance. No loans
have repaid and one loan (1.5%) has defeased since issuance; there
have been no realized losses to date. Cumulative interest
shortfalls totaling $115,289 are affecting the non-rated class
NR-RR. Fifteen loans (45.8%) are interest-only for the full term.
An additional 16 loans (26.8%) were structured with partial
interest-only periods, six of which (3.4%) have not begun
amortizing. Four loans (12.3%) are scheduled to mature in 2022; the
remaining are scheduled to mature in 2024 (5.5%) and 2027 (80.9%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades could be triggered by an increase in pool-level
losses from underperforming or specially serviced loans.
Downgrades to the classes rated 'AAAsf' are not considered
likely due to position in the capital structure, but may occur
at 'AAAsf' or 'AA-sf' should interest shortfalls occur.
Downgrades to classes C and D may occur if overall pool
performance declines or loss expectations increase.
-- Downgrades to classes D-RR and E-RR may occur if loans in
special servicing remain unresolved, or if performance of the
FLOCs fails to stabilize. Downgrades to classes F-RR and G-RR
may occur if additional loans default or transfer to the
special servicer.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades could be triggered by significantly improved
performance coupled with paydown and/or defeasance. An upgrade
to classes B and C could occur with stabilization of the
FLOCs, but would be limited as concentrations increase.
Classes would not be upgraded above 'Asf' if there were
likelihood of interest shortfalls.
-- Upgrades of classes D, D-RR and E-RR would only occur with
significant improvement in credit enhancement and
stabilization of the FLOCs. An upgrade to classes F-RR and G-
RR is not likely unless performance of the FLOCs improves, and
if performance of the remaining pool is stable.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
UBS COMMERCIAL 2018-C13: Fitch Affirms B- Rating on G-RR Debt
-------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of UBS Commercial Mortgage
Trust 2018-C13. Fitch has also revised the Rating Outlooks for
classes D-RR and E-RR to Stable from Negative. The Outlooks on
classes F-RR and G-RR remain Negative.
DEBT RATING PRIOR
---- ------ -----
UBS 2018-C13
A-2 90353KAV1 LT AAAsf Affirmed AAAsf
A-3 90353KAX7 LT AAAsf Affirmed AAAsf
A-4 90353KAY5 LT AAAsf Affirmed AAAsf
A-S 90353KBB4 LT AAAsf Affirmed AAAsf
A-SB 90353KAW9 LT AAAsf Affirmed AAAsf
B 90353KBC2 LT AA-sf Affirmed AA-sf
C 90353KBD0 LT A-sf Affirmed A-sf
D 90353KAC3 LT BBBsf Affirmed BBBsf
D-RR 90353KAE9 LT BBB-sf Affirmed BBB-sf
E-RR 90353KAG4 LT BB+sf Affirmed BB+sf
F-RR 90353KAJ8 LT BB-sf Affirmed BB-sf
G-RR 90353KAL3 LT B-sf Affirmed B-sf
X-A 90353KAZ2 LT AAAsf Affirmed AAAsf
X-B 90353KBA6 LT A-sf Affirmed A-sf
X-D 90353KAA7 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Improved Loss Expectations: Fitch's base case loss has decreased
since the last rating action primarily due to a better than
expected outcome on the Pier 1 Imports Headquarters loan, which
paid in full in January 2021. Fitch's ratings incorporate a base
case loss of 4.0% and a sensitivity that reflects losses that could
reach 4.4% when factoring additional stresses to five hotel loans.
There are 16 Fitch Loans of Concern (FLOCs) (27.3%), including four
loans (10.0%) in special servicing; nine loans (17.3%) have been
flagged for upcoming lease expirations and/or pandemic-related
underperformance.
The Stable Outlooks reflect the stable performance of the majority
of the pool. The Negative Outlooks on classes F-RR and G-RR reflect
the concern over the FLOCs including four loans in special
servicing. The Outlook revision on classes D-RR and E-RR to Stable
from Negative reflects the positive resolution of the Pier 1
Imports Headquarters loan as well as better than expected
performance from loans amid the coronavirus pandemic.
The largest contributor to modelled loss is Barrywoods Crossing
(FLOC, 3.1%), which is securitized by a power center located in
Kansas City, MO. The YE 2020 NOI declined 32% due to rent
abatements in 2020. The subject's anchor, AMC Theatres (NRA 36.4%),
was closed between April and August 2020 in response to the
pandemic, activating the loan's cash trap. AMC received an
abatement of all rent between April and August 2020 and reduced
rent between September and December 2020. An additional rent
abatement was granted, which included a 50% reduction between
January and March 2021. Fitch's base case loss of approximately 19%
reflects a 9.5 % cap rate on YE 2020 NOI.
The second largest contributor to modelled losses is Riverwalk
(FLOC, 2.4%), which is secured by an office property located in
Lawrence, MA. The property's occupancy declined to 85% from 91% the
prior year. There is significant upcoming rollover of 21% in 2021.
Fitch's expected loss of 22% is based on a 25% stress to YE 2020
NOI.
Specially Serviced Loans: The Buckingham (6.8%) is a student
housing property located in Downtown Chicago. The loan transferred
to special servicing in July 2020 for payment default. The special
servicer is dual tracking negotiations with the borrower and
foreclosure. Fitch's base case loss of 1.5% reflects a 9.4% cap
rate on YE 2019 NOI.
Aspect RHG Hotel Portfolio (1.9%) is a portfolio of four limited
service hotels. The loan transferred to special servicing in
October 2020 for payment default. Per the special servicer, a
forbearance/modification closed in June 2021 and the loan is
anticipated to return to the master servicer with the September
2021 payment date. Fitch's base case loss of 1.5% reflects an 8%
cap rate on YE 2019 NOI.
Coronavirus Exposure: Thirteen loans (15.2%) are secured by lodging
properties, all of which are flagged as FLOCs. The hotels
experienced significant performance challenges in 2020 due to
reduced revenues and/or temporary property closures related to the
pandemic. Fitch ran an additional sensitivity scenario with a 26%
stress to the YE 2019 NOI for all thirteen hotels to test the
durability of the cash flows. The Negative Outlooks on classes F-RR
and G-RR are partially attributable to this sensitivity.
Minimal Change in Credit Enhancement: As of the August 2021
distribution date, the pool's aggregate balance has been reduced by
7.4% to $662.1 million from $714.9 million at issuance. No loans
have been defeased and no loans mature until 2023. In January 2021,
Pier 1 Imports Headquarters prepaid with a yield maintenance fee
for $28 million. Fourteen loans (32.5%) are classified as interest
only.
ADDITIONAL CONSIDERATIONS
Investment-Grade Credit Opinion Loans: At issuance Fitch gave 1670
Broadway (7.3%), Christiana Mall (4.5%) and Wyvernwood Apartments
(4.2%) investment-grade credit opinions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The Negative Outlooks on classes F-RR and G-RR reflect the
potential for downgrades due to concerns surrounding the
ultimate impact of the coronavirus pandemic and the
performance concerns associated with the FLOCs.
-- Downgrades could be triggered by an increase in pool-level
losses from underperforming or specially serviced loans.
Downgrades to the classes rated 'AAAsf' are not considered
likely due to position in the capital structure, but may occur
at 'AAAsf' or 'AA-sf' should interest shortfalls occur.
Downgrades to classes C through E-RR may occur if overall pool
performance declines or loss expectations increase. Downgrades
to classes F-RR and G-RR may occur if loans in special
servicing resolve with higher than anticipated losses, or if
additional loans exhibit declining performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades could be triggered by significantly improved
performance coupled with paydown and/or defeasance. An upgrade
to classes B and C could occur with stabilization of the
FLOCs, but would be limited as concentrations increase.
Classes would not be upgraded above 'Asf' if there is
likelihood of interest shortfalls.
-- Upgrades of classes D, D-RR and E-RR would only occur with
significant improvement in credit enhancement and
stabilization of the FLOCs. An upgrade to classes F-RR and G-
RR is not likely unless performance of the FLOCs improves, and
if performance of the remaining pool is stable.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
VERUS 2021-5: S&P Assigns Prelim B- (sf) Rating on Class B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Verus
Securitization Trust 2021-5's mortgage-backed notes.
The note issuance is an RMBS securitization backed by primarily
first-lien, fixed-rate, and adjustable-rate residential mortgage
loans, including mortgage loans with initial interest-only periods
and/or balloon terms. The loans are secured primarily by
single-family residences, planned unit developments, two- to
four-family residential properties, condominiums, multifamily
homes, and mixed-use properties to both prime and nonprime
borrowers. The pool has 1,141 loans backed by 1,232 properties,
which are primarily non-qualified mortgage/ability -to-repay (ATR)
compliant and ATR-exempt loans.
The preliminary ratings are based on information as of September 8,
2021. The collateral and structural information reflect the term
sheet dated September 8, 2021. Subsequent information may result in
the assignment of final ratings that differ from the preliminary
ratings.
The preliminary ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework;
-- The transaction's geographic concentration;
-- The mortgage aggregator, Invictus Capital Partners; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
Preliminary Ratings Assigned(i)
Verus Securitization Trust 2021-5
Class A-1, $472,599,000: AAA (sf)
Class A-2, $38,337,000: AA (sf)
Class A-3, $68,532,000: A (sf)
Class M-1, $38,337,000: BBB- (sf)
Class B-1, $25,106,000: BB- (sf)
Class B-2, $18,660,000: B- (sf)
Class B-3, $16,963,824: Not rated
Class A-IO-S, notional(ii): Not rated
Class XS, notional(ii): Not rated
Class DA: Not rated
Class R: Not rated
(i)The collateral and structural information reflect the term sheet
dated Sept. 8, 2021; the preliminary ratings address the ultimate
payment of interest and principal.
(ii)The notional amount equals the aggregate stated principal
balance of loans in the pool.
WELLS FARGO 2018-C47: Fitch Affirms B- Rating on H-RR Certs
-----------------------------------------------------------
Fitch Ratings has affirmed 16 classes of Wells Fargo Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
series 2018-C47. In addition, Fitch has revised the Rating Outlooks
on three classes to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
WFCM 2018-C47
A-1 95002DAU3 LT AAAsf Affirmed AAAsf
A-2 95002DAX7 LT AAAsf Affirmed AAAsf
A-3 95002DBD0 LT AAAsf Affirmed AAAsf
A-4 95002DBG3 LT AAAsf Affirmed AAAsf
A-S 95002DBR9 LT AAAsf Affirmed AAAsf
A-SB 95002DBA6 LT AAAsf Affirmed AAAsf
B 95002DBU2 LT AA-sf Affirmed AA-sf
C 95002DBX6 LT A-sf Affirmed A-sf
D 95002DAC3 LT BBB-sf Affirmed BBB-sf
E-RR 95002DAE9 LT BBB-sf Affirmed BBB-sf
F-RR 95002DAG4 LT BB+sf Affirmed BB+sf
G-RR 95002DAJ8 LT BB-sf Affirmed BB-sf
H-RR 95002DAL3 LT B-sf Affirmed B-sf
X-A 95002DBK4 LT AAAsf Affirmed AAAsf
X-B 95002DBN8 LT AA-sf Affirmed AA-sf
X-D 95002DAA7 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Improved Loss Expectations: Fitch's loss expectations have declined
since the prior rating action due to improved recovery expectations
on the specially serviced loans, as well as better than expected
performance on performing loans in 2020. The majority of the pool
continues to exhibit stable performance. Fitch identified 13 loans
(24.3%) that have been designated Fitch Loans of Concern (FLOCs),
including two specially serviced loans (5.0%) due to performance
declines related to either the coronavirus pandemic, occupancy
declines and/or upcoming tenant rollover.
Fitch's ratings incorporate a base case loss of 4.4%. The Negative
Outlooks reflect losses that could reach 6.0% when factoring in
additional pandemic-related stresses on five hotel loans and one
retail loan. Fitch's last rating action factored in deal expected
losses of 7.3% when factoring in pandemic-related stresses.
Fitch Loans of Concern/Specially Serviced Loans: The largest
contributor to Fitch's expected losses and largest specially
serviced loan is the Holiday Inn FIDI (3.7%), which is secured by
492 key full-service Holiday Inn Express in the financial district
of New York City that was built in 2014. The loan transferred to
special servicing in May 2020 at the borrower's request due to
imminent monetary default. The borrower initially requested
forbearance, but the request was rejected and modification
discussions are ongoing. The hotel re-opened for business in April
2021 and the loan remains 90+ days delinquent.
NOI DSCR as of March 2021 was -0.94x compared to -0.75x at YE 2020,
and 2.38x at YE 2019. The TTM June 2021 occupancy, ADR, and RevPar
are 32.1%, $84, and $27 compared to 42.1%, $107, and $45 for the
comp set. Fitch's base case loss expectation of 12% reflects a
stress to the most recent appraisal and implies a stressed value
per key of $169k/key. Given the lower leverage, ultimate recoveries
may be higher.
The second largest contributor to modeled loss, Showcase II (4.8%),
is secured by a 41,407-sf retail property located in Las Vegas, NV.
The property is located on Las Vegas Boulevard and is within
walking distance of numerous hotel resorts, casinos, and other
demand drivers. Major tenants include American Eagle (26.5% NRA,
lease expires Jan. 2028), Adidas (25% NRA, lease expires Sept.
2027) and T-Mobile (24.8% NRA, lease expires Jan. 2028). Occupancy
has declined to 90% as of June 2021 compared to 100% at YE 2020 due
to US Polo vacating in 2021.
NOI has remained stable and the June 2021 DSCR was 1.65x compared
to 1.66x at YE 2020, and 1.70x at YE 2019. Fitch's base case
analysis was based on the YE 2020 NOI and resulted in an
approximate loss severity of 8%.
Alternative Loss Consideration: Fitch ran an additional sensitivity
scenario which applied additional pandemic related stresses applied
to five hotel loans and one retail loan not in special servicing
which addresses the potential that performance does not recover to
pre-pandemic levels and values decline. The Negative Outlooks
reflect this scenario.
Minimal Changes to Credit Enhancement: As of the August 2021
distribution date, the pool's aggregate principal balance has been
paid down by 1.1% to $941.2 million from $951.6 million at
issuance. Twenty-nine loans (39.4% of the pool) have a partial
interest-only component, 16 of these loans have begun to amortize.
Eighteen loans (39.5%) are interest-only for the full loan term,
including six loans (28.7%) in the top 15. One loan representing
.55% of the pool is fully defeased.
Investment-Grade Credit Opinion Loans: Three loans representing
13.4% of the pool were assigned investment-grade credit opinions at
issuance: Aventura Mall (5.3%), Christiana Mall (5.3%), and 2747
Park Boulevard (2.8%).
Maturity Concentrations: Two loans (2.7% of the pool) mature in
2023. The remaining pool (97.3%) matures in 2028.
Coronavirus Exposure: There are nine hotel loans (22.1% of the
pool) and 25 retail loans (37.0% of the pool).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool-level losses
from underperforming or specially serviced loans/assets.
Downgrades to the super-senior 'AAAsf'-rated classes are not
likely due to the high CE and amortization, but could occur if
there are interest shortfalls, or if a high proportion of the
pool defaults and expected losses increase significantly. A
downgrade to the junior 'AAAsf' rated class (class A-S) is
possible should expected losses for the pool increase
significantly and/or should many of the loans susceptible to
the coronavirus pandemic suffer losses.
-- Downgrades to 'AA-sf' and 'A-sf', 'BBB-sf' rated classes are
possible should performance of the FLOCs continue to decline,
if additional loans transfer to special servicing and/or
should loans susceptible to the pandemic not stabilize.
Downgrades to 'BB+sf', 'BB-sf', 'B-sf' rated classes with
Negative Outlooks would occur should loss expectations
increase due to an increase in specially serviced loans, the
disposition of a specially serviced loan/asset at a high loss,
or a decline in the FLOCs' performance.
-- The Negative Rating Outlooks may be revised back to Stable if
performance of the FLOCs improve, better than expected
recoveries on the specially serviced loans, and/or properties
vulnerable to the coronavirus stabilize once the pandemic is
over.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with stable to improved asset
performance, particularly on the FLOCs, coupled with paydown
and/or defeasance. Upgrades of the 'AA-sf' and 'A-sf' category
would likely occur with significant improvement in credit
enhancement and/or defeasance; however, adverse selection and
increased concentrations or the underperformance of particular
loan(s) could cause this trend to reverse.
-- Upgrades to 'BBB-sf' category are considered unlikely and
would be limited based on sensitivity to concentrations or the
potential for future concentration. Classes would not be
upgraded above 'Asf' if there were likelihood for interest
shortfalls. The 'BB+sf', 'BB-sf' 'B-sf' are unlikely to be
upgraded absent significant performance improvement and
substantially higher recoveries than expected on the FLOCs.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
WELLS FARGO 2021-2: Fitch to Rate B-5 Certs 'B+(EXP)'
-----------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by Wells Fargo Mortgage-Backed Securities
2021-2 Trust (WFMBS 2021-2).
DEBT RATING
---- ------
WFMBS 2021-2
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-13 LT AAA(EXP)sf Expected Rating
A-14 LT AAA(EXP)sf Expected Rating
A-15 LT AAA(EXP)sf Expected Rating
A-16 LT AAA(EXP)sf Expected Rating
A-17 LT AAA(EXP)sf Expected Rating
A-18 LT AAA(EXP)sf Expected Rating
A-19 LT AAA(EXP)sf Expected Rating
A-20 LT AAA(EXP)sf Expected Rating
A-IO1 LT AAA(EXP)sf Expected Rating
A-IO2 LT AAA(EXP)sf Expected Rating
A-IO3 LT AAA(EXP)sf Expected Rating
A-IO4 LT AAA(EXP)sf Expected Rating
A-IO5 LT AAA(EXP)sf Expected Rating
A-IO6 LT AAA(EXP)sf Expected Rating
A-IO7 LT AAA(EXP)sf Expected Rating
A-IO8 LT AAA(EXP)sf Expected Rating
A-IO9 LT AAA(EXP)sf Expected Rating
A-IO10 LT AAA(EXP)sf Expected Rating
A-IO11 LT AAA(EXP)sf Expected Rating
B-1 LT AA(EXP)sf Expected Rating
B-2 LT A(EXP)sf Expected Rating
B-3 LT BBB(EXP)sf Expected Rating
B-4 LT BB+(EXP)sf Expected Rating
B-5 LT B+(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 955 prime fixed-rate mortgage
loans with a total balance of approximately $644 million as of the
cutoff date. All the loans were originated by Wells Fargo Bank,
N.A. (Wells Fargo). This is the 14th post-crisis issuance from
Wells Fargo.
KEY RATING DRIVERS
Very High-Quality Mortgage Pool (Positive): The collateral
attributes are among the strongest of post-crisis RMBS rated by
Fitch. The pool consists entirely of 30-year fixed-rate fully
amortizing loans to borrowers with strong credit profiles and low
leverage. All loans are Safe Harbor Qualified Mortgages and 99% of
the loans are agency eligible. The loans are seasoned an average of
approximately 7.5 months, according to Fitch.
The pool has a weighted average (WA) original FICO score of 772,
which is indicative of very high credit-quality borrowers.
Approximately 76% has original FICO scores at or above 750. In
addition, the original WA combined loan to value ratio of 63.2%
represents solid borrower equity in the property. The pool's
attributes, together with Wells Fargo's sound origination
practices, support Fitch's very low default risk expectations.
High Geographic Concentration (Negative): Approximately 58% of the
pool is concentrated in California with relatively average MSA
concentration. The largest MSA concentration is the San Francisco
MSA (19.6%) followed by the Los Angeles MSA (19.3%) and the New
York MSA (13.3%). The top three MSAs account for 52.2% of the pool.
As a result, an additional penalty of approximately 11% was applied
to the pool's lifetime default expectations.
Straightforward Deal Structure (Mixed): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure whereby the subordinate classes receive
only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
To mitigate tail risk, which arises as the pool seasons and fewer
loans are outstanding, a subordination floor of 0.60% of the
original balance will be maintained for the senior certificates.
Full Servicer Advancing (Neutral): The pool benefits from advances
of delinquent principal and interest until the primary servicer of
the pool, Wells Fargo, deems them nonrecoverable. Fitch's loss
severities reflect reimbursement of amounts advanced by the
servicer from liquidation proceeds based on its liquidation
timelines assumed at each rating stress. In addition, the CE for
the rated classes has some cushion for recovery of servicer
advances for loans that are modified following a payment
forbearance.
Extraordinary Expense Treatment (Neutral): The trust provides for
expenses, including indemnification amounts, reviewer fees and
costs of arbitration, to be paid by the net WA coupon of the loans,
which does not affect the contractual interest due on the
certificates. Furthermore, the expenses to be paid from the trust
are capped at $350,000 per annum, with the exception of independent
reviewer breach review fee, which can be carried over each year,
subject to the cap until paid in full.
Updated Economic Risk Factor (Positive): Consistent with the
"Additional Scenario Analysis" section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario,
or if actual performance data indicates the current assumptions
require reconsideration. In response to revisions made to Fitch's
macroeconomic baseline scenario, observed actual performance data,
and the unexpected development in the health crisis arising from
the advancement and availability of COVID-19 vaccines, Fitch
reconsidered the application of the coronavirus-related Economic
Risk Factor (ERF) floors of 2.0 and used ERF Floors of 1.5 and 1.0
for the 'BBsf' and 'Bsf' rating stresses, respectively.
Fitch's March 2021 Global Economic Outlook and related base-line
economic scenario forecasts have been revised to a 6.2% U.S. GDP
growth for 2021 and 3.3% for 2022 following a -3.5% GDP growth in
2020. Additionally, Fitch's U.S. unemployment forecasts for 2021
and 2022 are 5.8% and 4.7%, respectively, which is down from 8.1%
in 2020. These revised forecasts support Fitch reverting back to
the 1.5 and 1.0 ERF floors described in Fitch's "U.S. RMBS Loan
Loss Model Criteria."
WFMBS 2021-2 has an ESG credit relevance score of '4' for Exposure
to Environmental Impacts due to an increased geographic
concentration/catastrophe risk which contributed to increased
stressed losses which were considered in the rating analysis.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 40.4% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to negative MVDs at the national
level, or in other words positive home price growth with no
assumed overvaluation. The analysis assumes positive home
price growth of 10%. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is
potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
Fitch has added a Coronavirus Sensitivity Analysis that includes a
prolonged health crisis resulting in depressed consumer demand and
a protracted period of below-trend economic activity that delays
any meaningful recovery to beyond 2021. Under this severe scenario,
Fitch expects the ratings to be impacted by changes in its
sustainable home price model due to updates to the model's
underlying economic data inputs. Any long-term impact arising from
coronavirus disruptions on these economic inputs will likely affect
both investment and speculative grade ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton Services LLC. The third-party due diligence
described in Form 15E focused on a compliance review, credit review
and valuation review. The due diligence company performed a review
on 59% of the loans. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment to
its analysis: loans with due diligence received a credit in the
loss model. This adjustment reduced the 'AAAsf' expected losses by
10bps.
ESG CONSIDERATIONS
WFMBS 2021-2 has an ESG credit relevance score of '4' for Exposure
to Environmental Impacts due to an increased geographic
concentration/catastrophe risk which contributed to increased
stressed losses which were considered in the rating analysis.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
WIND RIVER 2019-3: S&P Assigns BB- (sf) Rating on Class E-2R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, E-1R, and E-2R replacement notes from Wind River 2019-3 CLO
Ltd./Wind River 2019-3 CLO LLC, a CLO originally issued in 2019
that is managed by First Eagle Alternative Credit LLC. At the same
time, S&P withdrew its ratings on the original class X, A-1, A-2,
B, C, D, and E notes following payment in full on the Sept. 14,
2021 refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The non-call period was extended by approximately one year to
Sept. 14, 2022.
-- No additional assets were purchased on the Sept. 14, 2021,
refinancing date, and the target initial par amount remained at
$600 million. There is no additional effective date or ramp-up
period, and the first payment date following the refinancing is
Oct. 15, 2021.
-- The required minimum overcollateralization coverage ratios for
the class D, E, and reinvestment diversion test were amended.
-- The original class E notes were replaced with the class E-1R
and E-2R notes. The class E-1R notes are senior to the class E-2R
in the payment priority.
-- No additional subordinated notes were issued on the refinancing
date.
Replacement And Original Note Issuances
Replacement notes
Class A-R, $384.00 million: Three-month LIBOR + 1.08%
Class B-R, $66.00 million: Three-month LIBOR + 1.65%
Class C-R, $39.30 million: Three-month LIBOR + 2.20%
Class D-R, $32.70 million: Three-month LIBOR + 3.50%
Class E-1R, $12.00 million: Three-month LIBOR + 6.35%
Class E-2R, $12.00 million: Three-month LIBOR + 6.75%
Original notes
Class X, $1.20 million: Three-month LIBOR + 0.60%
Class A-1, 360.00 million: Three-month LIBOR + 1.33%
Class A-2, $24.00 million: Three-month LIBOR + 1.75%
Class B, $66.00 million: Three-month LIBOR + 2.10%
Class C, $39.30 million: Three-month LIBOR + 2.80%
Class D, $32.70 million: Three-month LIBOR + 4.10%
Class E, $24.00 million: Three-month LIBOR + 6.55%
Subordinated notes, $61.40 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Wind River 2019-3 CLO Ltd./Wind River 2019-3 CLO LLC
Class A-R, $384.00 million: AAA (sf)
Class B-R, $66.00 million: AA (sf)
Class C-R (deferrable), $39.30 million: A (sf)
Class D-R (deferrable), $32.70 million: BBB- (sf)
Class E-1R (deferrable), $12.00 million: BB+ (sf)
Class E-2R (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $61.40 million: NR
Ratings Withdrawn
Wind River 2019-3 CLO Ltd./Wind River 2019-3 CLO LLC
Class X to NR from 'AAA (sf)'
Class A-1 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
NR--Not rated.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
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Monthly Operating Reports are summarized in every Saturday edition
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The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog,
Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa,
Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo
Fernandez, Christopher G. Patalinghug, and Peter A. Chapman,
Editors.
Copyright 2021. All rights reserved. ISSN: 1520-9474.
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*** End of Transmission ***